Correlation Between Berkshire Hathaway and Yamaha

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

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

Diversification Opportunities for Berkshire Hathaway and Yamaha

-0.47

Correlation Coefficient

Berkshire Hathaway  Yamaha

Very good diversification

The 3 months correlation between Berkshire and Yamaha is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Yamaha Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yamaha Motor 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 Yamaha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yamaha Motor has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Yamaha go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Yamaha

Assuming the 90 days horizon Berkshire Hathaway is expected to under-perform the Yamaha. But the stock apears to be less risky and, when comparing its historical volatility, Berkshire Hathaway is 3.93 times less risky than Yamaha. The stock trades about -0.3 of its potential returns per unit of risk. The Yamaha Motor Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  890.00  in Yamaha Motor Co on January 28, 2024 and sell it today you would earn a total of  21.00  from holding Yamaha Motor Co or generate 2.36% return on investment over 90 days.

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

Berkshire Hathaway  vs.  Yamaha Motor Co

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Yamaha Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yamaha Motor Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Yamaha is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Berkshire Hathaway and Yamaha

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

The idea behind Berkshire Hathaway and Yamaha Motor Co 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.