Correlation Between Wells Fargo and Berkshire Hathaway

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Can any of the company-specific risk be diversified away by investing in both Wells Fargo 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 Wells Fargo and Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Berkshire Hathaway, you can compare the effects of market volatilities on Wells Fargo 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 Wells Fargo with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Berkshire Hathaway.

Diversification Opportunities for Wells Fargo and Berkshire Hathaway

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Wells and Berkshire is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Berkshire Hathaway Inc in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Wells Fargo 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 Wells Fargo 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 Wells Fargo i.e., Wells Fargo and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Wells Fargo and Berkshire Hathaway

If you would invest  27,703,500  in Berkshire Hathaway on February 17, 2022 and sell it today you would earn a total of  19,463,500  from holding Berkshire Hathaway or generate 70.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.2%
ValuesDaily Returns

Wells Fargo  vs.  Berkshire Hathaway Inc

 Performance (%) 
      Timeline 
Wells Fargo 
Wells Performance
0 of 100
Over the last 90 days Wells Fargo has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Wells Fargo is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the insiders.
Berkshire Hathaway 
Berkshire Performance
0 of 100
Over the last 90 days Berkshire Hathaway has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Berkshire Price Channel

Wells Fargo and Berkshire Hathaway Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Wells Fargo and Berkshire Hathaway

The main advantage of trading using opposite Wells Fargo and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo 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 Wells Fargo 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 CEO Directory module to screen CEOs from public companies around the world.

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