Correlation Between Berkshire Hathaway and Fevertree Drinks
Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and Fevertree Drinks 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 Fevertree Drinks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Berkshire Hathaway and Fevertree Drinks Plc, you can compare the effects of market volatilities on Berkshire Hathaway and Fevertree Drinks 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 Fevertree Drinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and Fevertree Drinks.
Diversification Opportunities for Berkshire Hathaway and Fevertree Drinks
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Berkshire and Fevertree is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Fevertree Drinks Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fevertree Drinks Plc 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 Fevertree Drinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fevertree Drinks Plc has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Fevertree Drinks go up and down completely randomly.
Pair Corralation between Berkshire Hathaway and Fevertree Drinks
Assuming the 90 days trading horizon Berkshire Hathaway is expected to under-perform the Fevertree Drinks. But the stock apears to be less risky and, when comparing its historical volatility, Berkshire Hathaway is 1.52 times less risky than Fevertree Drinks. The stock trades about -0.28 of its potential returns per unit of risk. The Fevertree Drinks Plc is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 69,000 in Fevertree Drinks Plc on September 25, 2024 and sell it today you would lose (1,900) from holding Fevertree Drinks Plc or give up 2.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Berkshire Hathaway vs. Fevertree Drinks Plc
Performance |
| Timeline |
| Berkshire Hathaway |
| Fevertree Drinks Plc |
Berkshire Hathaway and Fevertree Drinks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Berkshire Hathaway and Fevertree Drinks
The main advantage of trading using opposite Berkshire Hathaway and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, Fevertree Drinks 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 Fevertree Drinks will offset losses from the drop in Fevertree Drinks' 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 |
| Fevertree Drinks vs. Berkshire Hathaway | Fevertree Drinks vs. Hyundai Motor | Fevertree Drinks vs. Samsung Electronics Co | Fevertree Drinks 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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