Correlation Between Berkshire Hathaway and Trane Technologies
Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and Trane Technologies 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 Trane Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Berkshire Hathaway and Trane Technologies plc, you can compare the effects of market volatilities on Berkshire Hathaway and Trane Technologies 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 Trane Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and Trane Technologies.
Diversification Opportunities for Berkshire Hathaway and Trane Technologies
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Berkshire and Trane is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Trane Technologies plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trane Technologies 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 Trane Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trane Technologies plc has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Trane Technologies go up and down completely randomly.
Pair Corralation between Berkshire Hathaway and Trane Technologies
Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 0.76 times more return on investment than Trane Technologies. However, Berkshire Hathaway is 1.31 times less risky than Trane Technologies. It trades about -0.04 of its potential returns per unit of risk. Trane Technologies plc is currently generating about -0.21 per unit of risk. If you would invest 14,031 in Berkshire Hathaway on October 11, 2024 and sell it today you would lose (121.00) from holding Berkshire Hathaway or give up 0.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Berkshire Hathaway vs. Trane Technologies plc
Performance |
| Timeline |
| Berkshire Hathaway |
| Trane Technologies plc |
Berkshire Hathaway and Trane Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Berkshire Hathaway and Trane Technologies
The main advantage of trading using opposite Berkshire Hathaway and Trane Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, Trane Technologies 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 Trane Technologies will offset losses from the drop in Trane Technologies' long position.| Berkshire Hathaway vs. Akamai Technologies, | Berkshire Hathaway vs. GX AI TECH | Berkshire Hathaway vs. Cognizant Technology Solutions | Berkshire Hathaway vs. Beyond Meat |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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