Correlation Between North American and Berkshire Hathaway
Can any of the company-specific risk be diversified away by investing in both North American 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 North American and Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and Berkshire Hathaway CDR, you can compare the effects of market volatilities on North American 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 North American with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Berkshire Hathaway.
Diversification Opportunities for North American and Berkshire Hathaway
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between North and Berkshire is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction 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 North American 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 North American Construction 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 North American i.e., North American and Berkshire Hathaway go up and down completely randomly.
Pair Corralation between North American and Berkshire Hathaway
Assuming the 90 days trading horizon North American Construction is expected to under-perform the Berkshire Hathaway. In addition to that, North American is 1.79 times more volatile than Berkshire Hathaway CDR. It trades about -0.26 of its total potential returns per unit of risk. Berkshire Hathaway CDR is currently generating about 0.15 per unit of volatility. If you would invest 3,395 in Berkshire Hathaway CDR on November 3, 2024 and sell it today you would earn a total of 130.00 from holding Berkshire Hathaway CDR or generate 3.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Construction vs. Berkshire Hathaway CDR
Performance |
| Timeline |
| North American Const |
| Berkshire Hathaway CDR |
North American and Berkshire Hathaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and Berkshire Hathaway
The main advantage of trading using opposite North American and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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.| North American vs. PHX Energy Services | North American vs. CES Energy Solutions | North American vs. Total Energy Services | North American vs. Pason Systems |
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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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