Correlation Between Exco Technologies and Berkshire Hathaway
Can any of the company-specific risk be diversified away by investing in both Exco Technologies 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 Exco Technologies and Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exco Technologies Limited and Berkshire Hathaway CDR, you can compare the effects of market volatilities on Exco Technologies 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 Exco Technologies with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exco Technologies and Berkshire Hathaway.
Diversification Opportunities for Exco Technologies and Berkshire Hathaway
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Exco and Berkshire is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Exco Technologies Limited and Berkshire Hathaway CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway CDR and Exco Technologies 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 Exco Technologies Limited 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 CDR has no effect on the direction of Exco Technologies i.e., Exco Technologies and Berkshire Hathaway go up and down completely randomly.
Pair Corralation between Exco Technologies and Berkshire Hathaway
Assuming the 90 days trading horizon Exco Technologies Limited is expected to under-perform the Berkshire Hathaway. But the stock apears to be less risky and, when comparing its historical volatility, Exco Technologies Limited is 1.27 times less risky than Berkshire Hathaway. The stock trades about -0.07 of its potential returns per unit of risk. The Berkshire Hathaway CDR is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 3,444 in Berkshire Hathaway CDR on August 31, 2024 and sell it today you would earn a total of 256.00 from holding Berkshire Hathaway CDR or generate 7.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exco Technologies Limited vs. Berkshire Hathaway CDR
Performance |
| Timeline |
| Exco Technologies |
| Berkshire Hathaway CDR |
Exco Technologies and Berkshire Hathaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exco Technologies and Berkshire Hathaway
The main advantage of trading using opposite Exco Technologies and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exco Technologies 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.| Exco Technologies vs. Berkshire Hathaway CDR | Exco Technologies vs. JPMorgan Chase Co | Exco Technologies vs. Bank of America | Exco Technologies vs. Alphabet Inc CDR |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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