Correlation Between Visa and Berkshire Hathaway
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Berkshire Hathaway, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Berkshire Hathaway.
Diversification Opportunities for Visa and Berkshire Hathaway
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Visa and Berkshire is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Visa 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 Visa Class A 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 Visa i.e., Visa and Berkshire Hathaway go up and down completely randomly.
Pair Corralation between Visa and Berkshire Hathaway
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.9 times more return on investment than Berkshire Hathaway. However, Visa Class A is 1.11 times less risky than Berkshire Hathaway. It trades about 0.35 of its potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.16 per unit of risk. If you would invest 28,119 in Visa Class A on August 26, 2024 and sell it today you would earn a total of 2,873 from holding Visa Class A or generate 10.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Berkshire Hathaway
Performance |
| Timeline |
| Visa Class A |
| Berkshire Hathaway |
Visa and Berkshire Hathaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Berkshire Hathaway
The main advantage of trading using opposite Visa and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| Berkshire Hathaway vs. American International Group | Berkshire Hathaway vs. Sun Life Financial | Berkshire Hathaway vs. Arch Capital Group | Berkshire Hathaway vs. Hartford Financial Services |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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