Correlation Between Berkshire Hathaway and Enbridge
Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and Enbridge 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 Enbridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Berkshire Hathaway and Enbridge, you can compare the effects of market volatilities on Berkshire Hathaway and Enbridge 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 Enbridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and Enbridge.
Diversification Opportunities for Berkshire Hathaway and Enbridge
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Berkshire and Enbridge is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge 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 Enbridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Enbridge go up and down completely randomly.
Pair Corralation between Berkshire Hathaway and Enbridge
Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 0.87 times more return on investment than Enbridge. However, Berkshire Hathaway is 1.15 times less risky than Enbridge. It trades about 0.09 of its potential returns per unit of risk. Enbridge is currently generating about 0.06 per unit of risk. If you would invest 30,025 in Berkshire Hathaway on August 28, 2024 and sell it today you would earn a total of 15,570 from holding Berkshire Hathaway or generate 51.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Berkshire Hathaway vs. Enbridge
Performance |
| Timeline |
| Berkshire Hathaway |
| Enbridge |
Berkshire Hathaway and Enbridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Berkshire Hathaway and Enbridge
The main advantage of trading using opposite Berkshire Hathaway and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, Enbridge 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 Enbridge will offset losses from the drop in Enbridge's long position.| Berkshire Hathaway vs. Berkshire Hathaway | Berkshire Hathaway vs. Superior Plus Corp | Berkshire Hathaway vs. NMI Holdings | Berkshire Hathaway vs. Origin Agritech |
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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