Correlation Between China Resources and Berkshire Hathaway
Can any of the company-specific risk be diversified away by investing in both China Resources 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 China Resources and Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Resources Beer and Berkshire Hathaway, you can compare the effects of market volatilities on China Resources 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 China Resources with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Berkshire Hathaway.
Diversification Opportunities for China Resources and Berkshire Hathaway
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Berkshire is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and China Resources 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 China Resources Beer 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 China Resources i.e., China Resources and Berkshire Hathaway go up and down completely randomly.
Pair Corralation between China Resources and Berkshire Hathaway
Assuming the 90 days horizon China Resources Beer is expected to under-perform the Berkshire Hathaway. In addition to that, China Resources is 3.42 times more volatile than Berkshire Hathaway. It trades about -0.13 of its total potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.05 per unit of volatility. If you would invest 37,880 in Berkshire Hathaway on January 25, 2024 and sell it today you would earn a total of 280.00 from holding Berkshire Hathaway or generate 0.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
China Resources Beer vs. Berkshire Hathaway
Performance |
| Timeline |
| China Resources Beer |
| Berkshire Hathaway |
China Resources and Berkshire Hathaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and Berkshire Hathaway
The main advantage of trading using opposite China Resources and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources 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.| China Resources vs. MOLSON RS BEVERAGE | China Resources vs. Superior Plus Corp | China Resources vs. Origin Agritech | China Resources vs. Identiv |
| Berkshire Hathaway vs. Berkshire Hathaway | Berkshire Hathaway vs. Zurich Insurance Group | Berkshire Hathaway vs. Sun Life Financial | Berkshire Hathaway vs. Arch Capital Group |
Check out your portfolio center.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 Global Correlations module to find global opportunities by holding instruments from different markets.
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