Correlation Between Definity Financial and Berkshire Hathaway
Can any of the company-specific risk be diversified away by investing in both Definity Financial 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 Definity Financial and Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Definity Financial Corp and Berkshire Hathaway CDR, you can compare the effects of market volatilities on Definity Financial 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 Definity Financial with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Definity Financial and Berkshire Hathaway.
Diversification Opportunities for Definity Financial and Berkshire Hathaway
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Definity and Berkshire is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Definity Financial Corp and Berkshire Hathaway CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway CDR and Definity Financial 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 Definity Financial Corp 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 CDR has no effect on the direction of Definity Financial i.e., Definity Financial and Berkshire Hathaway go up and down completely randomly.
Pair Corralation between Definity Financial and Berkshire Hathaway
Assuming the 90 days trading horizon Definity Financial Corp is expected to generate 0.82 times more return on investment than Berkshire Hathaway. However, Definity Financial Corp is 1.23 times less risky than Berkshire Hathaway. It trades about 0.34 of its potential returns per unit of risk. Berkshire Hathaway CDR is currently generating about 0.23 per unit of risk. If you would invest 5,373 in Definity Financial Corp on September 1, 2024 and sell it today you would earn a total of 480.00 from holding Definity Financial Corp or generate 8.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Definity Financial Corp vs. Berkshire Hathaway CDR
Performance |
| Timeline |
| Definity Financial Corp |
| Berkshire Hathaway CDR |
Definity Financial and Berkshire Hathaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Definity Financial and Berkshire Hathaway
The main advantage of trading using opposite Definity Financial and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Definity Financial 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.| Definity Financial vs. Trisura Group | Definity Financial vs. Pet Valu Holdings | Definity Financial vs. Intact Financial | Definity Financial vs. Topaz Energy Corp |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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