Correlation Between Berkshire Hathaway and NVIDIA
Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and NVIDIA 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 NVIDIA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Berkshire Hathaway and NVIDIA, you can compare the effects of market volatilities on Berkshire Hathaway and NVIDIA 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 NVIDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and NVIDIA.
Diversification Opportunities for Berkshire Hathaway and NVIDIA
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Berkshire and NVIDIA is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA 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 NVIDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and NVIDIA go up and down completely randomly.
Pair Corralation between Berkshire Hathaway and NVIDIA
Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 0.43 times more return on investment than NVIDIA. However, Berkshire Hathaway is 2.33 times less risky than NVIDIA. It trades about -0.21 of its potential returns per unit of risk. NVIDIA is currently generating about -0.21 per unit of risk. If you would invest 962,600 in Berkshire Hathaway on September 15, 2024 and sell it today you would lose (39,150) from holding Berkshire Hathaway or give up 4.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Berkshire Hathaway vs. NVIDIA
Performance |
| Timeline |
| Berkshire Hathaway |
| NVIDIA |
Berkshire Hathaway and NVIDIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Berkshire Hathaway and NVIDIA
The main advantage of trading using opposite Berkshire Hathaway and NVIDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, NVIDIA 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 NVIDIA will offset losses from the drop in NVIDIA's long position.| Berkshire Hathaway vs. American International Group | Berkshire Hathaway vs. Netflix | Berkshire Hathaway vs. iShares Global Timber | Berkshire Hathaway vs. Vanguard World |
| NVIDIA vs. Grupo Carso SAB | NVIDIA vs. Cognizant Technology Solutions | NVIDIA vs. New Oriental Education | NVIDIA vs. McEwen Mining |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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