Correlation Between Grupo Mexicano and Berkshire Hathaway

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

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

Diversification Opportunities for Grupo Mexicano and Berkshire Hathaway

-0.47

Correlation Coefficient

Grupo Mexicano  Berkshire Hathaway

Very good diversification

The 3 months correlation between Grupo and Berkshire is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Mexicano de and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Grupo Mexicano 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 Grupo Mexicano de 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 Grupo Mexicano i.e., Grupo Mexicano and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Grupo Mexicano and Berkshire Hathaway

Assuming the 90 days trading horizon Grupo Mexicano de is expected to under-perform the Berkshire Hathaway. But the stock apears to be less risky and, when comparing its historical volatility, Grupo Mexicano de is 1.91 times less risky than Berkshire Hathaway. The stock trades about -0.26 of its potential returns per unit of risk. The Berkshire Hathaway is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  893,639  in Berkshire Hathaway on September 26, 2024 and sell it today you would earn a total of  29,261  from holding Berkshire Hathaway or generate 3.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Grupo Mexicano de  vs.  Berkshire Hathaway

Grupo Mexicano de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Mexicano de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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.

Pair Trading with Grupo Mexicano and Berkshire Hathaway

The main advantage of trading using opposite Grupo Mexicano and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Mexicano 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 Grupo Mexicano de 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.