Correlation Between Berkshire Hathaway and Canadian General

Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and Canadian General 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 Canadian General 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 Canadian General Investments, you can compare the effects of market volatilities on Berkshire Hathaway and Canadian General 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 Canadian General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and Canadian General.

Diversification Opportunities for Berkshire Hathaway and Canadian General

0.53

Correlation Coefficient

Berkshire Hathaway  Canadian General

Very weak diversification

The 3 months correlation between Berkshire and Canadian is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway CDR and Canadian General Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian General Inv 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 Canadian General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian General Inv has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Canadian General go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Canadian General

Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 2.6 times less return on investment than Canadian General. In addition to that, Berkshire Hathaway is 1.09 times more volatile than Canadian General Investments. It trades about 0.05 of its total potential returns per unit of risk. Canadian General Investments is currently generating about 0.13 per unit of volatility. If you would invest  3,845  in Canadian General Investments on September 13, 2024 and sell it today you would earn a total of  308.00  from holding Canadian General Investments or generate 8.01% return on investment over 90 days.

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

Berkshire Hathaway CDR  vs.  Canadian General Investments

Berkshire Hathaway CDR

Risk-Adjusted Performance

3 of 100

Insignificant

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

Canadian General Inv

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian General Investments are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Canadian General may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Berkshire Hathaway and Canadian General

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

The idea behind Berkshire Hathaway CDR and Canadian General Investments 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.