Correlation Between Berkshire Hathaway and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and Costco Wholesale 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 Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Berkshire Hathaway CDR and Costco Wholesale Corp, you can compare the effects of market volatilities on Berkshire Hathaway and Costco Wholesale 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 Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and Costco Wholesale.
Diversification Opportunities for Berkshire Hathaway and Costco Wholesale
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Berkshire and Costco is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway CDR and Costco Wholesale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale 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 CDR are associated (or correlated) with Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale Corp has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Costco Wholesale go up and down completely randomly.
Pair Corralation between Berkshire Hathaway and Costco Wholesale
Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 1.79 times less return on investment than Costco Wholesale. But when comparing it to its historical volatility, Berkshire Hathaway CDR is 1.3 times less risky than Costco Wholesale. It trades about 0.1 of its potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,197 in Costco Wholesale Corp on August 31, 2024 and sell it today you would earn a total of 2,314 from holding Costco Wholesale Corp or generate 105.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Berkshire Hathaway CDR vs. Costco Wholesale Corp
Performance |
| Timeline |
| Berkshire Hathaway CDR |
| Costco Wholesale Corp |
Berkshire Hathaway and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Berkshire Hathaway and Costco Wholesale
The main advantage of trading using opposite Berkshire Hathaway and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, Costco Wholesale 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 Costco Wholesale will offset losses from the drop in Costco Wholesale's long position.| Berkshire Hathaway vs. iShares Canadian HYBrid | Berkshire Hathaway vs. Brompton European Dividend | Berkshire Hathaway vs. Solar Alliance Energy | Berkshire Hathaway vs. PHN Multi Style All Cap |
| Costco Wholesale vs. Berkshire Hathaway CDR | Costco Wholesale vs. JPMorgan Chase Co | Costco Wholesale vs. Bank of America | Costco Wholesale vs. Alphabet Inc CDR |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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