Correlation Between Brookfield Business and Berkshire Hathaway
Can any of the company-specific risk be diversified away by investing in both Brookfield Business 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 Brookfield Business and Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookfield Business Corp and Berkshire Hathaway CDR, you can compare the effects of market volatilities on Brookfield Business 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 Brookfield Business with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Business and Berkshire Hathaway.
Diversification Opportunities for Brookfield Business and Berkshire Hathaway
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Brookfield and Berkshire is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Business Corp and Berkshire Hathaway CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway CDR and Brookfield Business 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 Brookfield Business Corp 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 CDR has no effect on the direction of Brookfield Business i.e., Brookfield Business and Berkshire Hathaway go up and down completely randomly.
Pair Corralation between Brookfield Business and Berkshire Hathaway
Assuming the 90 days trading horizon Brookfield Business Corp is expected to generate 2.27 times more return on investment than Berkshire Hathaway. However, Brookfield Business is 2.27 times more volatile than Berkshire Hathaway CDR. It trades about 0.02 of its potential returns per unit of risk. Berkshire Hathaway CDR is currently generating about -0.11 per unit of risk. If you would invest 3,710 in Brookfield Business Corp on September 14, 2024 and sell it today you would earn a total of 12.00 from holding Brookfield Business Corp or generate 0.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brookfield Business Corp vs. Berkshire Hathaway CDR
Performance |
| Timeline |
| Brookfield Business Corp |
| Berkshire Hathaway CDR |
Brookfield Business and Berkshire Hathaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookfield Business and Berkshire Hathaway
The main advantage of trading using opposite Brookfield Business and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Business 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.| Brookfield Business vs. Postmedia Network Canada | Brookfield Business vs. CNJ Capital Investments | Brookfield Business vs. Canadian General Investments | Brookfield Business vs. Enerev5 Metals |
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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