Correlation Between Berkshire Hathaway and Arconic

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

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

Diversification Opportunities for Berkshire Hathaway and Arconic

0.0

Correlation Coefficient

Berkshire Hathaway  Arconic

Pay attention - limited upside

The 3 months correlation between Berkshire and Arconic is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Arconic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arconic 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 Arconic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arconic has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Arconic go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Arconic

If you would invest  59,709,200  in Berkshire Hathaway on February 11, 2024 and sell it today you would earn a total of  2,490,800  from holding Berkshire Hathaway or generate 4.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Berkshire Hathaway  vs.  Arconic

Berkshire Hathaway

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Berkshire Hathaway is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Arconic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arconic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Arconic is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Berkshire Hathaway and Arconic

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

The idea behind Berkshire Hathaway and Arconic 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.