Correlation Between European Residential and Berkshire Hathaway
Can any of the company-specific risk be diversified away by investing in both European Residential 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 European Residential and Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between European Residential Real and Berkshire Hathaway CDR, you can compare the effects of market volatilities on European Residential 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 European Residential with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Residential and Berkshire Hathaway.
Diversification Opportunities for European Residential and Berkshire Hathaway
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between European and Berkshire is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real 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 European Residential 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 European Residential Real 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 European Residential i.e., European Residential and Berkshire Hathaway go up and down completely randomly.
Pair Corralation between European Residential and Berkshire Hathaway
Assuming the 90 days trading horizon European Residential Real is expected to generate 2.56 times more return on investment than Berkshire Hathaway. However, European Residential is 2.56 times more volatile than Berkshire Hathaway CDR. It trades about 0.24 of its potential returns per unit of risk. Berkshire Hathaway CDR is currently generating about 0.19 per unit of risk. If you would invest 305.00 in European Residential Real on August 30, 2024 and sell it today you would earn a total of 62.00 from holding European Residential Real or generate 20.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
European Residential Real vs. Berkshire Hathaway CDR
Performance |
| Timeline |
| European Residential Real |
| Berkshire Hathaway CDR |
European Residential and Berkshire Hathaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Residential and Berkshire Hathaway
The main advantage of trading using opposite European Residential and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Residential 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.| European Residential vs. Minto Apartment Real | European Residential vs. Nexus Real Estate | European Residential vs. Morguard North American |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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