Correlation Between Capstone Mining and Fairfax Financial

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

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

Diversification Opportunities for Capstone Mining and Fairfax Financial

-0.71

Correlation Coefficient

Capstone Mining  Fairfax Financial

Pay attention - limited upside

The 3 months correlation between Capstone and Fairfax is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Capstone Mining Corp and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and Capstone Mining 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 Capstone Mining Corp 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 Capstone Mining i.e., Capstone Mining and Fairfax Financial go up and down completely randomly.

Pair Corralation between Capstone Mining and Fairfax Financial

Assuming the 90 days horizon Capstone Mining Corp is expected to under-perform the Fairfax Financial. In addition to that, Capstone Mining is 1.3 times more volatile than Fairfax Financial Holdings. It trades about -0.11 of its total potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.24 per unit of volatility. If you would invest  1,860  in Fairfax Financial Holdings on October 6, 2024 and sell it today you would earn a total of  365.00  from holding Fairfax Financial Holdings or generate 19.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Capstone Mining Corp  vs.  Fairfax Financial Holdings

Capstone Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capstone Mining Corp 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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Fairfax Financial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Fairfax Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capstone Mining and Fairfax Financial

The main advantage of trading using opposite Capstone Mining and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capstone Mining 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 Capstone Mining Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.