Correlation Between CVW CleanTech and Fairfax Fin

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

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

Diversification Opportunities for CVW CleanTech and Fairfax Fin

0.71

Correlation Coefficient

CVW CleanTech  Fairfax Fin

Poor diversification

The 3 months correlation between CVW and Fairfax is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding CVW CleanTech 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 CVW CleanTech 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 CVW CleanTech 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 CVW CleanTech i.e., CVW CleanTech and Fairfax Fin go up and down completely randomly.

Pair Corralation between CVW CleanTech and Fairfax Fin

Assuming the 90 days horizon CVW CleanTech is expected to generate 1.5 times less return on investment than Fairfax Fin. In addition to that, CVW CleanTech is 5.67 times more volatile than Fairfax Fin Hld. It trades about 0.01 of its total potential returns per unit of risk. Fairfax Fin Hld is currently generating about 0.09 per unit of volatility. If you would invest  1,754  in Fairfax Fin Hld on October 5, 2024 and sell it today you would earn a total of  745.00  from holding Fairfax Fin Hld or generate 42.47% return on investment over 90 days.

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

CVW CleanTech  vs.  Fairfax Fin Hld

CVW CleanTech

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CVW CleanTech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, CVW CleanTech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Fairfax Fin Hld

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Fin Hld are ranked lower than 20 (%) 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 CVW CleanTech and Fairfax Fin

The main advantage of trading using opposite CVW CleanTech and Fairfax Fin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVW CleanTech 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 CVW CleanTech 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.