Correlation Between METHODE ELECTRONICS and Berkshire Hathaway

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Can any of the company-specific risk be diversified away by investing in both METHODE ELECTRONICS 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 METHODE ELECTRONICS and Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between METHODE ELECTRONICS and Berkshire Hathaway, you can compare the effects of market volatilities on METHODE ELECTRONICS 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 METHODE ELECTRONICS with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of METHODE ELECTRONICS and Berkshire Hathaway.

Diversification Opportunities for METHODE ELECTRONICS and Berkshire Hathaway

0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between METHODE and Berkshire is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding METHODE ELECTRONICS and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and METHODE ELECTRONICS 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 METHODE ELECTRONICS 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 METHODE ELECTRONICS i.e., METHODE ELECTRONICS and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between METHODE ELECTRONICS and Berkshire Hathaway

Assuming the 90 days trading horizon METHODE ELECTRONICS is expected to under-perform the Berkshire Hathaway. In addition to that, METHODE ELECTRONICS is 4.24 times more volatile than Berkshire Hathaway. It trades about -0.04 of its total potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.1 per unit of volatility. If you would invest  28,555  in Berkshire Hathaway on September 12, 2024 and sell it today you would earn a total of  15,685  from holding Berkshire Hathaway or generate 54.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

METHODE ELECTRONICS  vs.  Berkshire Hathaway

 Performance 
       Timeline  
METHODE ELECTRONICS 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in METHODE ELECTRONICS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, METHODE ELECTRONICS unveiled solid returns over the last few months and may actually be approaching a breakup point.
Berkshire Hathaway 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Berkshire Hathaway may actually be approaching a critical reversion point that can send shares even higher in January 2025.

METHODE ELECTRONICS and Berkshire Hathaway Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with METHODE ELECTRONICS and Berkshire Hathaway

The main advantage of trading using opposite METHODE ELECTRONICS and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if METHODE ELECTRONICS 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 METHODE ELECTRONICS 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.
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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