Correlation Between Berkshire Hathaway and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and Applied Materials at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Berkshire Hathaway and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Berkshire Hathaway and Applied Materials, you can compare the effects of market volatilities on Berkshire Hathaway and Applied Materials and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Berkshire Hathaway with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and Applied Materials.
Diversification Opportunities for Berkshire Hathaway and Applied Materials
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Berkshire and Applied is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Berkshire Hathaway is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Berkshire Hathaway are associated (or correlated) with Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Applied Materials go up and down completely randomly.
Pair Corralation between Berkshire Hathaway and Applied Materials
Assuming the 90 days trading horizon Berkshire Hathaway is expected to under-perform the Applied Materials. But the stock apears to be less risky and, when comparing its historical volatility, Berkshire Hathaway is 2.27 times less risky than Applied Materials. The stock trades about -0.08 of its potential returns per unit of risk. The Applied Materials is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 17,434 in Applied Materials on October 26, 2024 and sell it today you would earn a total of 1,406 from holding Applied Materials or generate 8.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Berkshire Hathaway vs. Applied Materials
Performance |
| Timeline |
| Berkshire Hathaway |
| Applied Materials |
Berkshire Hathaway and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Berkshire Hathaway and Applied Materials
The main advantage of trading using opposite Berkshire Hathaway and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, Applied Materials can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Applied Materials will offset losses from the drop in Applied Materials' long position.| Berkshire Hathaway vs. Rheinmetall AG | Berkshire Hathaway vs. PPHE Hotel Group | Berkshire Hathaway vs. First Class Metals | Berkshire Hathaway vs. Jacquet Metal Service |
| Applied Materials vs. Berkshire Hathaway | Applied Materials vs. Samsung Electronics Co | Applied Materials vs. Samsung Electronics Co | Applied Materials vs. Chocoladefabriken Lindt Spruengli |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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