Correlation Between Centerra Gold and Fairfax Financial

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

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

Diversification Opportunities for Centerra Gold and Fairfax Financial

-0.71

Correlation Coefficient

Centerra Gold  Fairfax Financial

Pay attention - limited upside

The 3 months correlation between Centerra and Fairfax is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Centerra Gold and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and Centerra Gold 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 Centerra Gold are associated (or correlated) with Fairfax Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairfax Financial has no effect on the direction of Centerra Gold i.e., Centerra Gold and Fairfax Financial go up and down completely randomly.

Pair Corralation between Centerra Gold and Fairfax Financial

Assuming the 90 days horizon Centerra Gold is expected to under-perform the Fairfax Financial. In addition to that, Centerra Gold is 2.86 times more volatile than Fairfax Financial Holdings. It trades about -0.13 of its total potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.0 per unit of volatility. If you would invest  2,385  in Fairfax Financial Holdings on September 23, 2024 and sell it today you would earn a total of  0.00  from holding Fairfax Financial Holdings or generate 0.0% return on investment over 90 days.

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

Centerra Gold  vs.  Fairfax Financial Holdings

Centerra Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centerra Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Fairfax Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal technical indicators, Fairfax Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Centerra Gold and Fairfax Financial

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

The idea behind Centerra Gold and Fairfax Financial Holdings 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.