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
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Citigroup and Berkshire is -0.1. 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
Taking into account the 90-day investment horizon Citigroup is expected to generate 15.05 times less return on investment than Berkshire Hathaway. But when comparing it to its historical volatility, Citigroup is 34.65 times less risky than Berkshire Hathaway. It trades about 0.12 of its potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 50,800,000 in Berkshire Hathaway on August 29, 2024 and sell it today you would earn a total of 17,750,000 from holding Berkshire Hathaway or generate 34.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.42% |
| 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.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| Berkshire Hathaway vs. XLMedia PLC | Berkshire Hathaway vs. Nordic Semiconductor ASA | Berkshire Hathaway vs. REMEDY ENTERTAINMENT OYJ | Berkshire Hathaway vs. ZINC MEDIA GR |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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