Correlation Between United States and Berkshire Hathaway
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Berkshire Hathaway, you can compare the effects of market volatilities on United States 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 United States with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Berkshire Hathaway.
Diversification Opportunities for United States and Berkshire Hathaway
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Berkshire is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and United States 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 United States Steel 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 United States i.e., United States and Berkshire Hathaway go up and down completely randomly.
Pair Corralation between United States and Berkshire Hathaway
Given the investment horizon of 90 days United States is expected to generate 1.42 times less return on investment than Berkshire Hathaway. In addition to that, United States is 1.94 times more volatile than Berkshire Hathaway. It trades about 0.06 of its total potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.16 per unit of volatility. If you would invest 925,898 in Berkshire Hathaway on August 31, 2024 and sell it today you would earn a total of 59,102 from holding Berkshire Hathaway or generate 6.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
United States Steel vs. Berkshire Hathaway
Performance |
| Timeline |
| United States Steel |
| Berkshire Hathaway |
United States and Berkshire Hathaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Berkshire Hathaway
The main advantage of trading using opposite United States and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. Delta Air Lines | United States vs. Grupo Carso SAB | United States vs. McEwen Mining | United States vs. Monster Beverage Corp |
| Berkshire Hathaway vs. Costco Wholesale | Berkshire Hathaway vs. UnitedHealth Group Incorporated | Berkshire Hathaway vs. DXC Technology | Berkshire Hathaway vs. Southern Copper |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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