Correlation Between Doman Building and Fairfax Fin

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

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

Diversification Opportunities for Doman Building and Fairfax Fin

0.57

Correlation Coefficient

Doman Building  Fairfax Fin

Very weak diversification

The 3 months correlation between Doman and Fairfax is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Doman Building Materials 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 Doman Building 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 Doman Building Materials 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 Doman Building i.e., Doman Building and Fairfax Fin go up and down completely randomly.

Pair Corralation between Doman Building and Fairfax Fin

Assuming the 90 days trading horizon Doman Building Materials is expected to generate 2.13 times more return on investment than Fairfax Fin. However, Doman Building is 2.13 times more volatile than Fairfax Fin Hld. It trades about 0.05 of its potential returns per unit of risk. Fairfax Fin Hld is currently generating about 0.09 per unit of risk. If you would invest  605.00  in Doman Building Materials on October 8, 2024 and sell it today you would earn a total of  242.00  from holding Doman Building Materials or generate 40.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Doman Building Materials  vs.  Fairfax Fin Hld

Doman Building Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Doman Building Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Doman Building is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

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 unfluctuating technical indicators, Fairfax Fin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Doman Building and Fairfax Fin

The main advantage of trading using opposite Doman Building and Fairfax Fin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Doman Building 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 Doman Building Materials 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..