Correlation Between Berkshire Hathaway and Credicorp

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

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

Diversification Opportunities for Berkshire Hathaway and Credicorp

0.74

Correlation Coefficient

Berkshire Hathaway  Credicorp

Poor diversification

The 3 months correlation between Berkshire and Credicorp is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Credicorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credicorp 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 Credicorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credicorp has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Credicorp go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Credicorp

Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 3.02 times less return on investment than Credicorp. But when comparing it to its historical volatility, Berkshire Hathaway is 1.57 times less risky than Credicorp. It trades about 0.05 of its potential returns per unit of risk. Credicorp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  327,484  in Credicorp on September 25, 2024 and sell it today you would earn a total of  36,516  from holding Credicorp or generate 11.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Berkshire Hathaway  vs.  Credicorp

Berkshire Hathaway

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly 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.

Credicorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Credicorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Credicorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Berkshire Hathaway and Credicorp

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

The idea behind Berkshire Hathaway and Credicorp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.