Correlation Between Berkshire Hathaway and Air France

Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and Air France 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 Hathaway and Air France into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Berkshire Hathaway and Air France KLM, you can compare the effects of market volatilities on Berkshire Hathaway and Air France 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 Hathaway with a short position of Air France. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and Air France.

Diversification Opportunities for Berkshire Hathaway and Air France

-0.37

Correlation Coefficient

Berkshire Hathaway  Air France

Very good diversification

The 3 months correlation between Berkshire and Air is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Air France KLM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air France KLM and Berkshire Hathaway 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 are associated (or correlated) with Air France. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air France KLM has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Air France go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Air France

Assuming the 90 days trading horizon Berkshire Hathaway is expected to under-perform the Air France. But the stock apears to be less risky and, when comparing its historical volatility, Berkshire Hathaway is 2.66 times less risky than Air France. The stock trades about -0.22 of its potential returns per unit of risk. The Air France KLM is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  983.00  in Air France KLM on February 4, 2024 and sell it today you would earn a total of  20.00  from holding Air France KLM or generate 2.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Berkshire Hathaway  vs.  Air France KLM

Berkshire Hathaway

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Berkshire Hathaway is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Air France KLM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air France KLM has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Berkshire Hathaway and Air France

The main advantage of trading using opposite Berkshire Hathaway and Air France positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, Air France 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 Air France will offset losses from the drop in Air France's long position.

The idea behind Berkshire Hathaway and Air France KLM 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.