Correlation Between BERKSHIRE and PayPal Holdings

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

Diversification Opportunities for BERKSHIRE and PayPal Holdings

-0.12
  Correlation Coefficient

Good diversification

The 3 months correlation between BERKSHIRE and PayPal is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding BERKSHIRE HATHAWAY ENERGY and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings and BERKSHIRE 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 BERKSHIRE HATHAWAY ENERGY are associated (or correlated) with PayPal Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PayPal Holdings has no effect on the direction of BERKSHIRE i.e., BERKSHIRE and PayPal Holdings go up and down completely randomly.

Pair Corralation between BERKSHIRE and PayPal Holdings

Assuming the 90 days trading horizon BERKSHIRE HATHAWAY ENERGY is expected to generate 0.04 times more return on investment than PayPal Holdings. However, BERKSHIRE HATHAWAY ENERGY is 25.05 times less risky than PayPal Holdings. It trades about -0.12 of its potential returns per unit of risk. PayPal Holdings is currently generating about -0.28 per unit of risk. If you would invest  9,970  in BERKSHIRE HATHAWAY ENERGY on November 28, 2024 and sell it today you would lose (33.00) from holding BERKSHIRE HATHAWAY ENERGY or give up 0.33% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

BERKSHIRE HATHAWAY ENERGY  vs.  PayPal Holdings

 Performance 
       Timeline  
BERKSHIRE HATHAWAY ENERGY 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days BERKSHIRE HATHAWAY ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BERKSHIRE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
PayPal Holdings 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days PayPal Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

BERKSHIRE and PayPal Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BERKSHIRE and PayPal Holdings

The main advantage of trading using opposite BERKSHIRE and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BERKSHIRE position performs unexpectedly, PayPal Holdings 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 PayPal Holdings will offset losses from the drop in PayPal Holdings' long position.
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The idea behind BERKSHIRE HATHAWAY ENERGY and PayPal Holdings 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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