Correlation Between Berkshire Hathaway and LAir Liquide

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Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and LAir Liquide 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 LAir Liquide into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Berkshire Hathaway and LAir Liquide SA, you can compare the effects of market volatilities on Berkshire Hathaway and LAir Liquide 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 LAir Liquide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and LAir Liquide.

Diversification Opportunities for Berkshire Hathaway and LAir Liquide

-0.54
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Berkshire and LAir is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and LAir Liquide SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAir Liquide SA 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 LAir Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAir Liquide SA has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and LAir Liquide go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and LAir Liquide

Assuming the 90 days horizon Berkshire Hathaway is expected to generate 0.65 times more return on investment than LAir Liquide. However, Berkshire Hathaway is 1.54 times less risky than LAir Liquide. It trades about 0.11 of its potential returns per unit of risk. LAir Liquide SA is currently generating about 0.05 per unit of risk. If you would invest  30,639  in Berkshire Hathaway on August 30, 2024 and sell it today you would earn a total of  17,669  from holding Berkshire Hathaway or generate 57.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Berkshire Hathaway  vs.  LAir Liquide SA

 Performance 
       Timeline  
Berkshire Hathaway 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Berkshire Hathaway is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
LAir Liquide SA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days LAir Liquide SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Berkshire Hathaway and LAir Liquide Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Berkshire Hathaway and LAir Liquide

The main advantage of trading using opposite Berkshire Hathaway and LAir Liquide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, LAir Liquide 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 LAir Liquide will offset losses from the drop in LAir Liquide's long position.
The idea behind Berkshire Hathaway and LAir Liquide SA 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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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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