Correlation Between Berkshire Hathaway and LOréal SA
Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and LOréal SA 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 LOréal SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Berkshire Hathaway and LOral SA, you can compare the effects of market volatilities on Berkshire Hathaway and LOréal SA 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 LOréal SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and LOréal SA.
Diversification Opportunities for Berkshire Hathaway and LOréal SA
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Berkshire and LOréal is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and LOral SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOréal SA 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 LOréal SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOréal SA has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and LOréal SA go up and down completely randomly.
Pair Corralation between Berkshire Hathaway and LOréal SA
Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 0.69 times more return on investment than LOréal SA. However, Berkshire Hathaway is 1.45 times less risky than LOréal SA. It trades about 0.22 of its potential returns per unit of risk. LOral SA is currently generating about -0.1 per unit of risk. If you would invest 45,110 in Berkshire Hathaway on November 28, 2024 and sell it today you would earn a total of 2,550 from holding Berkshire Hathaway or generate 5.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Berkshire Hathaway vs. LOral SA
Performance |
| Timeline |
| Berkshire Hathaway |
| LOréal SA |
Berkshire Hathaway and LOréal SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Berkshire Hathaway and LOréal SA
The main advantage of trading using opposite Berkshire Hathaway and LOréal SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, LOréal SA 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 LOréal SA will offset losses from the drop in LOréal SA's long position.| Berkshire Hathaway vs. FORMPIPE SOFTWARE AB | Berkshire Hathaway vs. PRECISION DRILLING P | Berkshire Hathaway vs. Kingdee International Software | Berkshire Hathaway vs. MAGIC SOFTWARE ENTR |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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