Correlation Between Baidu and Berkshire Hathaway
Can any of the company-specific risk be diversified away by investing in both Baidu 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 Baidu and Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baidu Inc and Berkshire Hathaway, you can compare the effects of market volatilities on Baidu 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 Baidu with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baidu and Berkshire Hathaway.
Diversification Opportunities for Baidu and Berkshire Hathaway
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Baidu and Berkshire is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Baidu 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 Baidu Inc 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 Baidu i.e., Baidu and Berkshire Hathaway go up and down completely randomly.
Pair Corralation between Baidu and Berkshire Hathaway
Assuming the 90 days trading horizon Baidu is expected to generate 4.05 times less return on investment than Berkshire Hathaway. In addition to that, Baidu is 1.82 times more volatile than Berkshire Hathaway. It trades about 0.02 of its total potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.18 per unit of volatility. If you would invest 719,300 in Berkshire Hathaway on September 3, 2024 and sell it today you would earn a total of 255,189 from holding Berkshire Hathaway or generate 35.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baidu Inc vs. Berkshire Hathaway
Performance |
| Timeline |
| Baidu Inc |
| Berkshire Hathaway |
Baidu and Berkshire Hathaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baidu and Berkshire Hathaway
The main advantage of trading using opposite Baidu and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baidu 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.| Baidu vs. Prudential Financial | Baidu vs. Delta Air Lines | Baidu vs. Taiwan Semiconductor Manufacturing | Baidu vs. Applied Materials |
| Berkshire Hathaway vs. Verizon Communications | Berkshire Hathaway vs. Samsung Electronics Co | Berkshire Hathaway vs. Ameriprise Financial | Berkshire Hathaway vs. Hoteles City Express |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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