Correlation Between Berkshire Hathaway and Spirent Communications
Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and Spirent Communications 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 Spirent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Berkshire Hathaway and Spirent Communications plc, you can compare the effects of market volatilities on Berkshire Hathaway and Spirent Communications 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 Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and Spirent Communications.
Diversification Opportunities for Berkshire Hathaway and Spirent Communications
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Berkshire and Spirent is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications 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 Spirent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirent Communications has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Spirent Communications go up and down completely randomly.
Pair Corralation between Berkshire Hathaway and Spirent Communications
Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 1.04 times more return on investment than Spirent Communications. However, Berkshire Hathaway is 1.04 times more volatile than Spirent Communications plc. It trades about 0.23 of its potential returns per unit of risk. Spirent Communications plc is currently generating about 0.2 per unit of risk. If you would invest 44,200 in Berkshire Hathaway on September 5, 2024 and sell it today you would earn a total of 2,650 from holding Berkshire Hathaway or generate 6.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Berkshire Hathaway vs. Spirent Communications plc
Performance |
| Timeline |
| Berkshire Hathaway |
| Spirent Communications |
Berkshire Hathaway and Spirent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Berkshire Hathaway and Spirent Communications
The main advantage of trading using opposite Berkshire Hathaway and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, Spirent Communications 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 Spirent Communications will offset losses from the drop in Spirent Communications' 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 |
| Spirent Communications vs. Berkshire Hathaway | Spirent Communications vs. Hyundai Motor | Spirent Communications vs. Samsung Electronics Co | Spirent Communications 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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