Correlation Between Compagnie Plastic and Berkshire Hathaway

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

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

Diversification Opportunities for Compagnie Plastic and Berkshire Hathaway

0.4

Correlation Coefficient

Compagnie Plastic  Berkshire Hathaway

Very weak diversification

The 3 months correlation between Compagnie and Berkshire is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Plastic Omnium and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Compagnie Plastic 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 Compagnie Plastic Omnium 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 has no effect on the direction of Compagnie Plastic i.e., Compagnie Plastic and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Compagnie Plastic and Berkshire Hathaway

Assuming the 90 days horizon Compagnie Plastic is expected to generate 149.3 times less return on investment than Berkshire Hathaway. But when comparing it to its historical volatility, Compagnie Plastic Omnium is 51.43 times less risky than Berkshire Hathaway. It trades about 0.04 of its potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  61,050,000  in Berkshire Hathaway on September 29, 2024 and sell it today you would earn a total of  4,800,000  from holding Berkshire Hathaway or generate 7.86% return on investment over 90 days.

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

Compagnie Plastic Omnium  vs.  Berkshire Hathaway

Compagnie Plastic Omnium

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Plastic Omnium are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Compagnie Plastic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Berkshire Hathaway

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Berkshire Hathaway reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compagnie Plastic and Berkshire Hathaway

The main advantage of trading using opposite Compagnie Plastic and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie Plastic 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 Compagnie Plastic Omnium and Berkshire Hathaway 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.