Correlation Between Sprott Physical and Berkshire Hathaway

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

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

Diversification Opportunities for Sprott Physical and Berkshire Hathaway

-0.24

Correlation Coefficient

Sprott Physical  Berkshire Hathaway

Very good diversification

The 3 months correlation between Sprott and Berkshire is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical Gold 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 Sprott Physical 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 Sprott Physical Gold 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 Sprott Physical i.e., Sprott Physical and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Sprott Physical and Berkshire Hathaway

Assuming the 90 days trading horizon Sprott Physical Gold is expected to generate 0.89 times more return on investment than Berkshire Hathaway. However, Sprott Physical Gold is 1.13 times less risky than Berkshire Hathaway. It trades about 0.06 of its potential returns per unit of risk. Berkshire Hathaway CDR is currently generating about 0.01 per unit of risk. If you would invest  2,794  in Sprott Physical Gold on September 26, 2024 and sell it today you would earn a total of  98.00  from holding Sprott Physical Gold or generate 3.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Sprott Physical Gold  vs.  Berkshire Hathaway CDR

Sprott Physical Gold

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Gold are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Sprott Physical is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Berkshire Hathaway CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Berkshire Hathaway CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Berkshire Hathaway is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sprott Physical and Berkshire Hathaway

The main advantage of trading using opposite Sprott Physical and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Physical 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 Sprott Physical Gold 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.