Correlation Between Berkshire Hathaway and Bristol-Myers Squibb

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

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

Diversification Opportunities for Berkshire Hathaway and Bristol-Myers Squibb

0.0

Correlation Coefficient

Berkshire Hathaway  Bristol-Myers Squibb

Pay attention - limited upside

The 3 months correlation between Berkshire and Bristol-Myers is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Bristol Myers Squibb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bristol Myers Squibb and Berkshire Hathaway 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 Berkshire Hathaway are associated (or correlated) with Bristol-Myers Squibb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bristol Myers Squibb has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Bristol-Myers Squibb go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Bristol-Myers Squibb

If you would invest (100.00) in Bristol Myers Squibb on January 26, 2024 and sell it today you would earn a total of  100.00  from holding Bristol Myers Squibb or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Berkshire Hathaway  vs.  Bristol Myers Squibb

Berkshire Hathaway

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Berkshire Hathaway is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Bristol Myers Squibb

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bristol Myers Squibb has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, Bristol-Myers Squibb is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Berkshire Hathaway and Bristol-Myers Squibb

The main advantage of trading using opposite Berkshire Hathaway and Bristol-Myers Squibb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, Bristol-Myers Squibb 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 Bristol-Myers Squibb will offset losses from the drop in Bristol-Myers Squibb's long position.

The idea behind Berkshire Hathaway and Bristol Myers Squibb 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.