Correlation Between Berkshire Hathaway and NVIDIA CDR

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

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

Diversification Opportunities for Berkshire Hathaway and NVIDIA CDR

-0.45

Correlation Coefficient

Berkshire Hathaway  NVIDIA CDR

Very good diversification

The 3 months correlation between Berkshire and NVIDIA is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway CDR and NVIDIA CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA CDR 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 CDR are associated (or correlated) with NVIDIA CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA CDR has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and NVIDIA CDR go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and NVIDIA CDR

Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 4.14 times less return on investment than NVIDIA CDR. But when comparing it to its historical volatility, Berkshire Hathaway CDR is 4.11 times less risky than NVIDIA CDR. It trades about 0.13 of its potential returns per unit of risk. NVIDIA CDR is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,163  in NVIDIA CDR on June 20, 2024 and sell it today you would earn a total of  1,498  from holding NVIDIA CDR or generate 128.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Berkshire Hathaway CDR  vs.  NVIDIA CDR

Berkshire Hathaway CDR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway CDR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Berkshire Hathaway may actually be approaching a critical reversion point that can send shares even higher in October 2024.

NVIDIA CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NVIDIA CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Berkshire Hathaway and NVIDIA CDR

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

The idea behind Berkshire Hathaway CDR and NVIDIA CDR 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.