Correlation Between Berkshire Hathaway and American International
Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and American International 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 American International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Berkshire Hathaway and American International Group, you can compare the effects of market volatilities on Berkshire Hathaway and American International 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 American International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and American International.
Diversification Opportunities for Berkshire Hathaway and American International
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Berkshire and American is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and American International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American International 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 American International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American International has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and American International go up and down completely randomly.
Pair Corralation between Berkshire Hathaway and American International
Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 1.52 times more return on investment than American International. However, Berkshire Hathaway is 1.52 times more volatile than American International Group. It trades about 0.27 of its potential returns per unit of risk. American International Group is currently generating about 0.15 per unit of risk. If you would invest 41,490 in Berkshire Hathaway on September 1, 2024 and sell it today you would earn a total of 4,855 from holding Berkshire Hathaway or generate 11.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Berkshire Hathaway vs. American International Group
Performance |
| Timeline |
| Berkshire Hathaway |
| American International |
Berkshire Hathaway and American International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Berkshire Hathaway and American International
The main advantage of trading using opposite Berkshire Hathaway and American International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, American International 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 American International will offset losses from the drop in American International's long position.| Berkshire Hathaway vs. Singapore Telecommunications Limited | Berkshire Hathaway vs. EAT WELL INVESTMENT | Berkshire Hathaway vs. COMBA TELECOM SYST | Berkshire Hathaway vs. Citic Telecom International |
| American International vs. Berkshire Hathaway | American International vs. Zurich Insurance Group | American International vs. Sun Life Financial | American International vs. Arch Capital Group |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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