Correlation Between Brookfield Infrastructure and Berkshire Hathaway
Can any of the company-specific risk be diversified away by investing in both Brookfield Infrastructure 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 Infrastructure 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 Infrastructure Partners and Berkshire Hathaway CDR, you can compare the effects of market volatilities on Brookfield Infrastructure 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 Infrastructure with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Infrastructure and Berkshire Hathaway.
Diversification Opportunities for Brookfield Infrastructure and Berkshire Hathaway
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Brookfield and Berkshire is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Infrastructure Part 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 Infrastructure 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 Infrastructure Partners 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 Infrastructure i.e., Brookfield Infrastructure and Berkshire Hathaway go up and down completely randomly.
Pair Corralation between Brookfield Infrastructure and Berkshire Hathaway
Assuming the 90 days trading horizon Brookfield Infrastructure Partners is expected to generate 0.8 times more return on investment than Berkshire Hathaway. However, Brookfield Infrastructure Partners is 1.25 times less risky than Berkshire Hathaway. It trades about 0.22 of its potential returns per unit of risk. Berkshire Hathaway CDR is currently generating about 0.04 per unit of risk. If you would invest 2,125 in Brookfield Infrastructure Partners on September 12, 2024 and sell it today you would earn a total of 259.00 from holding Brookfield Infrastructure Partners or generate 12.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brookfield Infrastructure Part vs. Berkshire Hathaway CDR
Performance |
| Timeline |
| Brookfield Infrastructure |
| Berkshire Hathaway CDR |
Brookfield Infrastructure and Berkshire Hathaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookfield Infrastructure and Berkshire Hathaway
The main advantage of trading using opposite Brookfield Infrastructure and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Infrastructure 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.The idea behind Brookfield Infrastructure Partners and Berkshire Hathaway CDR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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