Correlation Between Berkshire Hathaway and Manulife Financial

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

Diversification Opportunities for Berkshire Hathaway and Manulife Financial

-0.42

Correlation Coefficient

Berkshire Hathaway  Manulife Financial

Very good diversification

The 3 months correlation between Berkshire and Manulife is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway CDR and Manulife Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Financial Corp 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 Manulife Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Financial Corp has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Manulife Financial go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Manulife Financial

Assuming the 90 days trading horizon Berkshire Hathaway CDR is expected to generate 2.44 times more return on investment than Manulife Financial. However, Berkshire Hathaway is 2.44 times more volatile than Manulife Financial Corp. It trades about 0.02 of its potential returns per unit of risk. Manulife Financial Corp is currently generating about -0.06 per unit of risk. If you would invest  3,616  in Berkshire Hathaway CDR on August 31, 2024 and sell it today you would earn a total of  39.00  from holding Berkshire Hathaway CDR or generate 1.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Berkshire Hathaway CDR  vs.  Manulife Financial Corp

Berkshire Hathaway CDR

Risk-Adjusted Performance

1 of 100

Insignificant

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 recent stock price disarray, may contribute to short-term losses for the investors.

Manulife Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Manulife Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Manulife Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Berkshire Hathaway and Manulife Financial

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

The idea behind Berkshire Hathaway CDR and Manulife Financial Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.