Correlation Between NorAm Drilling and Berkshire Hathaway
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling 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 NorAm Drilling and Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NorAm Drilling AS and Berkshire Hathaway, you can compare the effects of market volatilities on NorAm Drilling 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 NorAm Drilling with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Berkshire Hathaway.
Diversification Opportunities for NorAm Drilling and Berkshire Hathaway
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NorAm and Berkshire is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and NorAm Drilling 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 NorAm Drilling AS 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 NorAm Drilling i.e., NorAm Drilling and Berkshire Hathaway go up and down completely randomly.
Pair Corralation between NorAm Drilling and Berkshire Hathaway
Assuming the 90 days horizon NorAm Drilling is expected to generate 2.63 times less return on investment than Berkshire Hathaway. In addition to that, NorAm Drilling is 2.58 times more volatile than Berkshire Hathaway. It trades about 0.01 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 63,950,000 in Berkshire Hathaway on August 25, 2024 and sell it today you would earn a total of 2,500,000 from holding Berkshire Hathaway or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. Berkshire Hathaway
Performance |
| Timeline |
| NorAm Drilling AS |
| Berkshire Hathaway |
NorAm Drilling and Berkshire Hathaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Berkshire Hathaway
The main advantage of trading using opposite NorAm Drilling and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling 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.| NorAm Drilling vs. Norwegian Air Shuttle | NorAm Drilling vs. WIZZ AIR HLDGUNSPADR4 | NorAm Drilling vs. LAir Liquide SA | NorAm Drilling vs. Fair Isaac Corp |
| Berkshire Hathaway vs. Zurich Insurance Group | Berkshire Hathaway vs. Superior Plus Corp | Berkshire Hathaway vs. NMI Holdings | Berkshire Hathaway vs. Origin Agritech |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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