Correlation Between Queens Road and Berkshire Hathaway

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

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

Diversification Opportunities for Queens Road and Berkshire Hathaway

0.15

Correlation Coefficient

Queens Road  Berkshire Hathaway

Average diversification

The 3 months correlation between Queens and Berkshire is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Queens Road 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 Queens Road 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 Queens Road 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 Queens Road i.e., Queens Road and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Queens Road and Berkshire Hathaway

Assuming the 90 days trading horizon Queens Road Capital is expected to under-perform the Berkshire Hathaway. In addition to that, Queens Road is 1.74 times more volatile than Berkshire Hathaway CDR. It trades about -0.01 of its total potential returns per unit of risk. Berkshire Hathaway CDR is currently generating about -0.01 per unit of volatility. If you would invest  3,484  in Berkshire Hathaway CDR on September 30, 2024 and sell it today you would lose (38.00) from holding Berkshire Hathaway CDR or give up 1.09% of portfolio value over 90 days.

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

Queens Road Capital  vs.  Berkshire Hathaway CDR

Queens Road Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Queens Road Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Queens Road 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 recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Queens Road and Berkshire Hathaway

The main advantage of trading using opposite Queens Road and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Queens Road 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 Queens Road 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.