Correlation Between Berkshire Hathaway and Southern Arc
Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and Southern Arc 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 Southern Arc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Berkshire Hathaway and Southern Arc Minerals, you can compare the effects of market volatilities on Berkshire Hathaway and Southern Arc 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 Southern Arc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and Southern Arc.
Diversification Opportunities for Berkshire Hathaway and Southern Arc
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Berkshire and Southern is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Southern Arc Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Arc Minerals 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 Southern Arc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Arc Minerals has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Southern Arc go up and down completely randomly.
Pair Corralation between Berkshire Hathaway and Southern Arc
Assuming the 90 days horizon Berkshire Hathaway is expected to generate 34.73 times less return on investment than Southern Arc. But when comparing it to its historical volatility, Berkshire Hathaway is 12.3 times less risky than Southern Arc. It trades about 0.04 of its potential returns per unit of risk. Southern Arc Minerals is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1.00 in Southern Arc Minerals on October 24, 2024 and sell it today you would earn a total of 1.27 from holding Southern Arc Minerals or generate 127.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Berkshire Hathaway vs. Southern Arc Minerals
Performance |
Timeline |
Berkshire Hathaway |
Southern Arc Minerals |
Berkshire Hathaway and Southern Arc Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Berkshire Hathaway and Southern Arc
The main advantage of trading using opposite Berkshire Hathaway and Southern Arc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, Southern Arc 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 Southern Arc will offset losses from the drop in Southern Arc's long position.Berkshire Hathaway vs. American International Group | Berkshire Hathaway vs. Sun Life Financial | Berkshire Hathaway vs. Arch Capital Group | Berkshire Hathaway vs. Hartford Financial Services |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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