Correlation Between Greenlight Capital and Berkshire Hathaway

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

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

Diversification Opportunities for Greenlight Capital and Berkshire Hathaway

0.58

Correlation Coefficient

Greenlight Capital  Berkshire Hathaway

Very weak diversification

The 3 months correlation between Greenlight and Berkshire is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Greenlight Capital Re and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Greenlight Capital 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 Greenlight Capital Re 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 Greenlight Capital i.e., Greenlight Capital and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Greenlight Capital and Berkshire Hathaway

Given the investment horizon of 90 days Greenlight Capital Re is expected to generate 1.83 times more return on investment than Berkshire Hathaway. However, Greenlight Capital is 1.83 times more volatile than Berkshire Hathaway. It trades about -0.03 of its potential returns per unit of risk. Berkshire Hathaway is currently generating about -0.25 per unit of risk. If you would invest  1,261  in Greenlight Capital Re on February 7, 2024 and sell it today you would lose (14.00) from holding Greenlight Capital Re or give up 1.11% of portfolio value over 90 days.

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

Greenlight Capital Re  vs.  Berkshire Hathaway

Greenlight Capital

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Greenlight Capital Re are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Greenlight Capital may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Berkshire Hathaway

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 1 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Greenlight Capital and Berkshire Hathaway

The main advantage of trading using opposite Greenlight Capital and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Greenlight Capital 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 Greenlight Capital Re and Berkshire Hathaway 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.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.