Correlation Between Brookfield Investments and Fairfax Fin

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

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

Diversification Opportunities for Brookfield Investments and Fairfax Fin

0.49

Correlation Coefficient

Brookfield Investments  Fairfax Fin

Very weak diversification

The 3 months correlation between Brookfield and Fairfax is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Investments 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 Brookfield Investments 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 Brookfield Investments 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 Brookfield Investments i.e., Brookfield Investments and Fairfax Fin go up and down completely randomly.

Pair Corralation between Brookfield Investments and Fairfax Fin

Assuming the 90 days trading horizon Brookfield Investments is expected to generate 0.86 times more return on investment than Fairfax Fin. However, Brookfield Investments is 1.16 times less risky than Fairfax Fin. It trades about 0.16 of its potential returns per unit of risk. Fairfax Fin Hld is currently generating about -0.07 per unit of risk. If you would invest  2,500  in Brookfield Investments on September 21, 2024 and sell it today you would earn a total of  13.00  from holding Brookfield Investments or generate 0.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	59.09%
Values	Daily Returns

Brookfield Investments  vs.  Fairfax Fin Hld

Brookfield Investments

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Investments are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brookfield Investments is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Fairfax Fin Hld

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Fin Hld are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical indicators, Fairfax Fin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield Investments and Fairfax Fin

The main advantage of trading using opposite Brookfield Investments and Fairfax Fin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Investments 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 Brookfield Investments 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.