Correlation Between China Gold and Fairfax Financial
Can any of the company-specific risk be diversified away by investing in both China 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 China 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 China Gold International and Fairfax Financial Holdings, you can compare the effects of market volatilities on China 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 China Gold with a short position of Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Gold and Fairfax Financial.
Diversification Opportunities for China Gold and Fairfax Financial
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Fairfax is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding China Gold International and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and China 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 China Gold International 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 China Gold i.e., China Gold and Fairfax Financial go up and down completely randomly.
Pair Corralation between China Gold and Fairfax Financial
Assuming the 90 days trading horizon China Gold International is expected to generate 3.4 times more return on investment than Fairfax Financial. However, China Gold is 3.4 times more volatile than Fairfax Financial Holdings. It trades about 0.05 of its potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.07 per unit of risk. If you would invest 439.00 in China Gold International on October 4, 2024 and sell it today you would earn a total of 306.00 from holding China Gold International or generate 69.7% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
China Gold International vs. Fairfax Financial Holdings
Performance |
Timeline |
China Gold International |
Fairfax Financial |
China Gold and Fairfax Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with China Gold and Fairfax Financial
The main advantage of trading using opposite China Gold and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China 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.China Gold vs. International Tower Hill | China Gold vs. Dundee Precious Metals | China Gold vs. Centerra Gold | China Gold vs. Loncor Resources |
Fairfax Financial vs. North American Financial | Fairfax Financial vs. US Financial 15 | Fairfax Financial vs. Earth Alive Clean | Fairfax Financial vs. Financial 15 Split |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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