Correlation Between ESE Entertainment and Berkshire Hathaway

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

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

Diversification Opportunities for ESE Entertainment and Berkshire Hathaway

-0.7

Correlation Coefficient

ESE Entertainment  Berkshire Hathaway

Excellent diversification

The 3 months correlation between ESE and Berkshire is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding ESE Entertainment and Berkshire Hathaway CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway CDR and ESE Entertainment 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 ESE Entertainment are associated (or correlated) with Berkshire Hathaway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkshire Hathaway CDR has no effect on the direction of ESE Entertainment i.e., ESE Entertainment and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between ESE Entertainment and Berkshire Hathaway

Assuming the 90 days horizon ESE Entertainment is expected to under-perform the Berkshire Hathaway. In addition to that, ESE Entertainment is 5.73 times more volatile than Berkshire Hathaway CDR. It trades about -0.15 of its total potential returns per unit of risk. Berkshire Hathaway CDR is currently generating about 0.05 per unit of volatility. If you would invest  3,389  in Berkshire Hathaway CDR on September 13, 2024 and sell it today you would earn a total of  94.00  from holding Berkshire Hathaway CDR or generate 2.77% return on investment over 90 days.

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

ESE Entertainment  vs.  Berkshire Hathaway CDR

ESE Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESE Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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.

Pair Trading with ESE Entertainment and Berkshire Hathaway

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

The idea behind ESE Entertainment and Berkshire Hathaway 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.