Correlation Between Berkshire Hathaway and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Berkshire Hathaway and Dow Jones Industrial, you can compare the effects of market volatilities on Berkshire Hathaway and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and Dow Jones.
Diversification Opportunities for Berkshire Hathaway and Dow Jones
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Berkshire and Dow is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Dow Jones go up and down completely randomly.
Pair Corralation between Berkshire Hathaway and Dow Jones
Assuming the 90 days horizon Berkshire Hathaway is expected to generate 61.82 times more return on investment than Dow Jones. However, Berkshire Hathaway is 61.82 times more volatile than Dow Jones Industrial. It trades about 0.04 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 43,400,000 in Berkshire Hathaway on August 30, 2024 and sell it today you would earn a total of 25,150,000 from holding Berkshire Hathaway or generate 57.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.21% |
| Values | Daily Returns |
Berkshire Hathaway vs. Dow Jones Industrial
Performance |
| Timeline |
Berkshire Hathaway and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Berkshire Hathaway
Pair trading matchups for Berkshire Hathaway
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Berkshire Hathaway and Dow Jones
The main advantage of trading using opposite Berkshire Hathaway and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Berkshire Hathaway vs. XLMedia PLC | Berkshire Hathaway vs. Nordic Semiconductor ASA | Berkshire Hathaway vs. REMEDY ENTERTAINMENT OYJ | Berkshire Hathaway vs. ZINC MEDIA GR |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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