Correlation Between American International and Berkshire Hathaway
Can any of the company-specific risk be diversified away by investing in both American International and Berkshire Hathaway 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 American International and Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American International Group and Berkshire Hathaway, you can compare the effects of market volatilities on American International and Berkshire Hathaway 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 American International with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of American International and Berkshire Hathaway.
Diversification Opportunities for American International and Berkshire Hathaway
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Berkshire is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding American International Group and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and American International 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 American International Group are associated (or correlated) with Berkshire Hathaway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkshire Hathaway has no effect on the direction of American International i.e., American International and Berkshire Hathaway go up and down completely randomly.
Pair Corralation between American International and Berkshire Hathaway
Assuming the 90 days trading horizon American International Group is expected to generate 1.95 times more return on investment than Berkshire Hathaway. However, American International is 1.95 times more volatile than Berkshire Hathaway. It trades about 0.14 of its potential returns per unit of risk. Berkshire Hathaway is currently generating about -0.21 per unit of risk. If you would invest 144,100 in American International Group on September 15, 2024 and sell it today you would earn a total of 7,250 from holding American International Group or generate 5.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American International Group vs. Berkshire Hathaway
Performance |
| Timeline |
| American International |
| Berkshire Hathaway |
American International and Berkshire Hathaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American International and Berkshire Hathaway
The main advantage of trading using opposite American International and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American International position performs unexpectedly, Berkshire Hathaway 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 Berkshire Hathaway will offset losses from the drop in Berkshire Hathaway's long position.| American International vs. Netflix | American International vs. iShares Global Timber | American International vs. Vanguard World | American International vs. iShares Trust |
| Berkshire Hathaway vs. American International Group | Berkshire Hathaway vs. Netflix | Berkshire Hathaway vs. iShares Global Timber | Berkshire Hathaway vs. Vanguard World |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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