Correlation Between Berkshire Hathaway and ShaMaran Petroleum

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

Diversification Opportunities for Berkshire Hathaway and ShaMaran Petroleum

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Berkshire and ShaMaran is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and ShaMaran Petroleum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ShaMaran Petroleum Corp 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 ShaMaran Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ShaMaran Petroleum Corp has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and ShaMaran Petroleum go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and ShaMaran Petroleum

Assuming the 90 days horizon Berkshire Hathaway is expected to under-perform the ShaMaran Petroleum. But the stock apears to be less risky and, when comparing its historical volatility, Berkshire Hathaway is 11.12 times less risky than ShaMaran Petroleum. The stock trades about -0.22 of its potential returns per unit of risk. The ShaMaran Petroleum Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7.00  in ShaMaran Petroleum Corp on September 17, 2024 and sell it today you would earn a total of  1.00  from holding ShaMaran Petroleum Corp or generate 14.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Berkshire Hathaway  vs.  ShaMaran Petroleum Corp

 Performance 
       Timeline  
Berkshire Hathaway 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Berkshire Hathaway has generated negative risk-adjusted returns adding no value to investors with long positions. 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.
ShaMaran Petroleum Corp 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in ShaMaran Petroleum Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, ShaMaran Petroleum reported solid returns over the last few months and may actually be approaching a breakup point.

Berkshire Hathaway and ShaMaran Petroleum Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Berkshire Hathaway and ShaMaran Petroleum

The main advantage of trading using opposite Berkshire Hathaway and ShaMaran Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, ShaMaran Petroleum 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 ShaMaran Petroleum will offset losses from the drop in ShaMaran Petroleum's long position.
The idea behind Berkshire Hathaway and ShaMaran Petroleum Corp 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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