Correlation Between Capital One and Berkshire Hathaway
Can any of the company-specific risk be diversified away by investing in both Capital One 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 Capital One and Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital One Financial and Berkshire Hathaway, you can compare the effects of market volatilities on Capital One 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 Capital One with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and Berkshire Hathaway.
Diversification Opportunities for Capital One and Berkshire Hathaway
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Capital and Berkshire is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Capital One 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 Capital One Financial 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 Capital One i.e., Capital One and Berkshire Hathaway go up and down completely randomly.
Pair Corralation between Capital One and Berkshire Hathaway
Assuming the 90 days trading horizon Capital One Financial is expected to under-perform the Berkshire Hathaway. But the stock apears to be less risky and, when comparing its historical volatility, Capital One Financial is 3.39 times less risky than Berkshire Hathaway. The stock trades about -0.22 of its potential returns per unit of risk. The Berkshire Hathaway is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 918,780 in Berkshire Hathaway on October 17, 2024 and sell it today you would earn a total of 1,620 from holding Berkshire Hathaway or generate 0.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital One Financial vs. Berkshire Hathaway
Performance |
| Timeline |
| Capital One Financial |
| Berkshire Hathaway |
Capital One and Berkshire Hathaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital One and Berkshire Hathaway
The main advantage of trading using opposite Capital One and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One 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.| Capital One vs. McEwen Mining | Capital One vs. Southwest Airlines | Capital One vs. UnitedHealth Group Incorporated | Capital One vs. CVS Health |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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