Correlation Between Spirent Communications and Berkshire Hathaway
Can any of the company-specific risk be diversified away by investing in both Spirent Communications 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 Spirent Communications and Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spirent Communications plc and Berkshire Hathaway, you can compare the effects of market volatilities on Spirent Communications 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 Spirent Communications with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Berkshire Hathaway.
Diversification Opportunities for Spirent Communications and Berkshire Hathaway
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Spirent and Berkshire is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Spirent Communications 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 Spirent Communications plc 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 Spirent Communications i.e., Spirent Communications and Berkshire Hathaway go up and down completely randomly.
Pair Corralation between Spirent Communications and Berkshire Hathaway
Assuming the 90 days trading horizon Spirent Communications plc is expected to generate 0.8 times more return on investment than Berkshire Hathaway. However, Spirent Communications plc is 1.25 times less risky than Berkshire Hathaway. It trades about 0.09 of its potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.02 per unit of risk. If you would invest 17,010 in Spirent Communications plc on October 25, 2024 and sell it today you would earn a total of 800.00 from holding Spirent Communications plc or generate 4.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.39% |
| Values | Daily Returns |
Spirent Communications plc vs. Berkshire Hathaway
Performance |
| Timeline |
| Spirent Communications |
| Berkshire Hathaway |
Spirent Communications and Berkshire Hathaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and Berkshire Hathaway
The main advantage of trading using opposite Spirent Communications and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications 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.| Spirent Communications vs. Fair Oaks Income | Spirent Communications vs. Porvair plc | Spirent Communications vs. Air Products Chemicals | Spirent Communications vs. Sealed Air Corp |
| Berkshire Hathaway vs. Scandinavian Tobacco Group | Berkshire Hathaway vs. Molson Coors Beverage | Berkshire Hathaway vs. British American Tobacco | Berkshire Hathaway vs. Sabre Insurance Group |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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