Correlation Between Berkshire Hathaway and Life Banc

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

Diversification Opportunities for Berkshire Hathaway and Life Banc

0.78

Correlation Coefficient

Berkshire Hathaway  Life Banc

Poor diversification

The 3 months correlation between Berkshire and Life is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway CDR and Life Banc Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Banc Split 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 Life Banc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Banc Split has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Life Banc go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Life Banc

Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 11.43 times less return on investment than Life Banc. In addition to that, Berkshire Hathaway is 1.18 times more volatile than Life Banc Split. It trades about 0.02 of its total potential returns per unit of risk. Life Banc Split is currently generating about 0.32 per unit of volatility. If you would invest  790.00  in Life Banc Split on September 14, 2024 and sell it today you would earn a total of  158.00  from holding Life Banc Split or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Berkshire Hathaway CDR  vs.  Life Banc Split

Berkshire Hathaway CDR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway CDR are ranked lower than 1 (%) 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 newest stock price disarray, may contribute to short-term losses for the investors.

Life Banc Split

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Life Banc Split are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Life Banc displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Berkshire Hathaway and Life Banc

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

The idea behind Berkshire Hathaway CDR and Life Banc Split 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.