Correlation Between Bird Construction and Fairfax Fin

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

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

Diversification Opportunities for Bird Construction and Fairfax Fin

0.35

Correlation Coefficient

Bird Construction  Fairfax Fin

Weak diversification

The 3 months correlation between Bird and Fairfax is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Bird Construction and Fairfax Fin Hld in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Fin Hld and Bird Construction 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 Bird Construction are associated (or correlated) with Fairfax Fin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairfax Fin Hld has no effect on the direction of Bird Construction i.e., Bird Construction and Fairfax Fin go up and down completely randomly.

Pair Corralation between Bird Construction and Fairfax Fin

Assuming the 90 days trading horizon Bird Construction is expected to under-perform the Fairfax Fin. But the stock apears to be less risky and, when comparing its historical volatility, Bird Construction is 1.55 times less risky than Fairfax Fin. The stock trades about -0.08 of its potential returns per unit of risk. The Fairfax Fin Hld is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  1,748  in Fairfax Fin Hld on September 16, 2024 and sell it today you would earn a total of  421.00  from holding Fairfax Fin Hld or generate 24.08% return on investment over 90 days.

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

Bird Construction  vs.  Fairfax Fin Hld

Bird Construction

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bird Construction are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Bird Construction displayed solid returns over the last few months and may actually be approaching a breakup point.

Fairfax Fin Hld

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Fin Hld are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal technical indicators, Fairfax Fin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bird Construction and Fairfax Fin

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

The idea behind Bird Construction and Fairfax Fin Hld 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.