Correlation Between Arch Capital and Berkshire Hathaway
Can any of the company-specific risk be diversified away by investing in both Arch Capital 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 Arch Capital and Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arch Capital Group and Berkshire Hathaway, you can compare the effects of market volatilities on Arch Capital 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 Arch Capital with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arch Capital and Berkshire Hathaway.
Diversification Opportunities for Arch Capital and Berkshire Hathaway
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Arch and Berkshire is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Arch Capital 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 Arch Capital Group 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 Arch Capital i.e., Arch Capital and Berkshire Hathaway go up and down completely randomly.
Pair Corralation between Arch Capital and Berkshire Hathaway
Assuming the 90 days horizon Arch Capital Group is expected to generate 1.66 times more return on investment than Berkshire Hathaway. However, Arch Capital is 1.66 times more volatile than Berkshire Hathaway. It trades about 0.08 of its potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.09 per unit of risk. If you would invest 5,300 in Arch Capital Group on September 4, 2024 and sell it today you would earn a total of 4,189 from holding Arch Capital Group or generate 79.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arch Capital Group vs. Berkshire Hathaway
Performance |
| Timeline |
| Arch Capital Group |
| Berkshire Hathaway |
Arch Capital and Berkshire Hathaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arch Capital and Berkshire Hathaway
The main advantage of trading using opposite Arch Capital and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arch Capital 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.| Arch Capital vs. FEMALE HEALTH | Arch Capital vs. GUARDANT HEALTH CL | Arch Capital vs. Plastic Omnium | Arch Capital vs. Compagnie Plastic Omnium |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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