Correlation Between Pentagon I and Berkshire Hathaway

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

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

Diversification Opportunities for Pentagon I and Berkshire Hathaway

0.17

Correlation Coefficient

Pentagon I  Berkshire Hathaway

Average diversification

The 3 months correlation between Pentagon and Berkshire is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Pentagon I Capital 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 Pentagon I 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 Pentagon I Capital 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 Pentagon I i.e., Pentagon I and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Pentagon I and Berkshire Hathaway

Assuming the 90 days trading horizon Pentagon I Capital is expected to under-perform the Berkshire Hathaway. In addition to that, Pentagon I is 7.77 times more volatile than Berkshire Hathaway CDR. It trades about -0.1 of its total potential returns per unit of risk. Berkshire Hathaway CDR is currently generating about 0.0 per unit of volatility. If you would invest  3,443  in Berkshire Hathaway CDR on September 23, 2024 and sell it today you would lose (24.00) from holding Berkshire Hathaway CDR or give up 0.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Pentagon I Capital  vs.  Berkshire Hathaway CDR

Pentagon I Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pentagon I Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company 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 Pentagon I and Berkshire Hathaway

The main advantage of trading using opposite Pentagon I and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentagon I 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 Pentagon I Capital 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.