Correlation Between Berkshire Hathaway and Tohoku Electric
Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and Tohoku Electric 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 Tohoku Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Berkshire Hathaway and Tohoku Electric Power, you can compare the effects of market volatilities on Berkshire Hathaway and Tohoku Electric 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 Tohoku Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and Tohoku Electric.
Diversification Opportunities for Berkshire Hathaway and Tohoku Electric
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Berkshire and Tohoku is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Tohoku Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tohoku Electric Power 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 Tohoku Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tohoku Electric Power has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Tohoku Electric go up and down completely randomly.
Pair Corralation between Berkshire Hathaway and Tohoku Electric
Assuming the 90 days horizon Berkshire Hathaway is expected to generate 2.49 times less return on investment than Tohoku Electric. But when comparing it to its historical volatility, Berkshire Hathaway is 3.82 times less risky than Tohoku Electric. It trades about 0.1 of its potential returns per unit of risk. Tohoku Electric Power is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 578.00 in Tohoku Electric Power on January 15, 2025 and sell it today you would earn a total of 122.00 from holding Tohoku Electric Power or generate 21.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 21.41% |
| Values | Daily Returns |
Berkshire Hathaway vs. Tohoku Electric Power
Performance |
| Timeline |
| Berkshire Hathaway |
| Tohoku Electric Power |
Berkshire Hathaway and Tohoku Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Berkshire Hathaway and Tohoku Electric
The main advantage of trading using opposite Berkshire Hathaway and Tohoku Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, Tohoku Electric 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 Tohoku Electric will offset losses from the drop in Tohoku Electric's long position.| Berkshire Hathaway vs. American International Group | Berkshire Hathaway vs. Arch Capital Group | Berkshire Hathaway vs. Sun Life Financial | Berkshire Hathaway vs. Hartford Financial Services |
| Tohoku Electric vs. Fortum Oyj ADR | Tohoku Electric vs. Astra Energy | Tohoku Electric vs. Brenmiller Energy Ltd | Tohoku Electric vs. Fortum Oyj |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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