Correlation Between Citigroup and Berkshire Hathaway
Can any of the company-specific risk be diversified away by investing in both Citigroup and Berkshire Hathaway 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 Citigroup and Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Berkshire Hathaway, you can compare the effects of market volatilities on Citigroup and Berkshire Hathaway 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 Citigroup with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Berkshire Hathaway.
Diversification Opportunities for Citigroup and Berkshire Hathaway
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and Berkshire is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Citigroup 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 Citigroup are associated (or correlated) with Berkshire Hathaway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkshire Hathaway has no effect on the direction of Citigroup i.e., Citigroup and Berkshire Hathaway go up and down completely randomly.
Pair Corralation between Citigroup and Berkshire Hathaway
Given the investment horizon of 90 days Citigroup is expected to generate 1.4 times more return on investment than Berkshire Hathaway. However, Citigroup is 1.4 times more volatile than Berkshire Hathaway. It trades about 0.24 of its potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.16 per unit of risk. If you would invest 127,364 in Citigroup on August 27, 2024 and sell it today you would earn a total of 16,686 from holding Citigroup or generate 13.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Berkshire Hathaway
Performance |
| Timeline |
| Citigroup |
| Berkshire Hathaway |
Citigroup and Berkshire Hathaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Berkshire Hathaway
The main advantage of trading using opposite Citigroup and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Berkshire Hathaway 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 Berkshire Hathaway will offset losses from the drop in Berkshire Hathaway's long position.The idea behind Citigroup and Berkshire Hathaway pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Berkshire Hathaway vs. Verizon Communications | Berkshire Hathaway vs. KB Home | Berkshire Hathaway vs. United States Steel | Berkshire Hathaway vs. Burlington Stores |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format |