Correlation Between Vanguard World and Berkshire Hathaway
Can any of the company-specific risk be diversified away by investing in both Vanguard World 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 Vanguard World and Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard World and Berkshire Hathaway, you can compare the effects of market volatilities on Vanguard World 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 Vanguard World with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard World and Berkshire Hathaway.
Diversification Opportunities for Vanguard World and Berkshire Hathaway
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Vanguard and Berkshire is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard World and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Vanguard World 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 Vanguard World 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 Vanguard World i.e., Vanguard World and Berkshire Hathaway go up and down completely randomly.
Pair Corralation between Vanguard World and Berkshire Hathaway
Assuming the 90 days trading horizon Vanguard World is expected to under-perform the Berkshire Hathaway. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard World is 1.03 times less risky than Berkshire Hathaway. The etf trades about -0.34 of its potential returns per unit of risk. The Berkshire Hathaway is currently generating about -0.21 of returns per unit of risk over similar time horizon. If you would invest 962,600 in Berkshire Hathaway on September 15, 2024 and sell it today you would lose (39,150) from holding Berkshire Hathaway or give up 4.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard World vs. Berkshire Hathaway
Performance |
| Timeline |
| Vanguard World |
| Berkshire Hathaway |
Vanguard World and Berkshire Hathaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard World and Berkshire Hathaway
The main advantage of trading using opposite Vanguard World and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard World 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.| Vanguard World vs. Vanguard Index Funds | Vanguard World vs. Vanguard Index Funds | Vanguard World vs. Vanguard STAR Funds | Vanguard World vs. SPDR SP 500 |
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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