Correlation Between Berkshire Hathaway and Bank of Georgia
Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and Bank of Georgia 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 Bank of Georgia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Berkshire Hathaway and Bank of Georgia, you can compare the effects of market volatilities on Berkshire Hathaway and Bank of Georgia 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 Bank of Georgia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and Bank of Georgia.
Diversification Opportunities for Berkshire Hathaway and Bank of Georgia
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Berkshire and Bank is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Bank of Georgia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Georgia 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 Bank of Georgia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Georgia has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Bank of Georgia go up and down completely randomly.
Pair Corralation between Berkshire Hathaway and Bank of Georgia
Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 0.48 times more return on investment than Bank of Georgia. However, Berkshire Hathaway is 2.1 times less risky than Bank of Georgia. It trades about -0.28 of its potential returns per unit of risk. Bank of Georgia is currently generating about -0.17 per unit of risk. If you would invest 47,975 in Berkshire Hathaway on September 24, 2024 and sell it today you would lose (2,250) from holding Berkshire Hathaway or give up 4.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Berkshire Hathaway vs. Bank of Georgia
Performance |
| Timeline |
| Berkshire Hathaway |
| Bank of Georgia |
Berkshire Hathaway and Bank of Georgia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Berkshire Hathaway and Bank of Georgia
The main advantage of trading using opposite Berkshire Hathaway and Bank of Georgia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, Bank of Georgia 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 Bank of Georgia will offset losses from the drop in Bank of Georgia's long position.| Berkshire Hathaway vs. Samsung Electronics Co | Berkshire Hathaway vs. Samsung Electronics Co | Berkshire Hathaway vs. Hyundai Motor | Berkshire Hathaway vs. Toyota Motor Corp |
| Bank of Georgia vs. Berkshire Hathaway | Bank of Georgia vs. Hyundai Motor | Bank of Georgia vs. Samsung Electronics Co | Bank of Georgia vs. Samsung Electronics Co |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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