Correlation Between VR and Berkshire Hathaway

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

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

Diversification Opportunities for VR and Berkshire Hathaway

0.31

Correlation Coefficient

VR  Berkshire Hathaway

Weak diversification

The 3 months correlation between VR and Berkshire is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding VR and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and VR 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 VR 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 VR i.e., VR and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between VR and Berkshire Hathaway

If you would invest (100.00) in VR on February 5, 2024 and sell it today you would earn a total of  100.00  from holding VR or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	0.0%
Values	Daily Returns

VR  vs.  Berkshire Hathaway

VR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Etf's basic indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Berkshire Hathaway

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 4 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with VR and Berkshire Hathaway

The main advantage of trading using opposite VR and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VR 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 VR 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.