Correlation Between Eastwood Bio and Fairfax Financial

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

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

Diversification Opportunities for Eastwood Bio and Fairfax Financial

-0.49

Correlation Coefficient

Eastwood Bio  Fairfax Financial

Very good diversification

The 3 months correlation between Eastwood and Fairfax is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Eastwood Bio Medical Canada and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and Eastwood Bio 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 Eastwood Bio Medical Canada 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 Eastwood Bio i.e., Eastwood Bio and Fairfax Financial go up and down completely randomly.

Pair Corralation between Eastwood Bio and Fairfax Financial

Assuming the 90 days horizon Eastwood Bio Medical Canada is expected to under-perform the Fairfax Financial. In addition to that, Eastwood Bio is 8.84 times more volatile than Fairfax Financial Holdings. It trades about -0.06 of its total potential returns per unit of risk. Fairfax Financial Holdings is currently generating about -0.07 per unit of volatility. If you would invest  2,300  in Fairfax Financial Holdings on September 30, 2024 and sell it today you would lose (34.00) from holding Fairfax Financial Holdings or give up 1.48% of portfolio value over 90 days.

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

Eastwood Bio Medical Canada  vs.  Fairfax Financial Holdings

Eastwood Bio Medical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eastwood Bio Medical Canada are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Eastwood Bio showed solid returns over the last few months and may actually be approaching a breakup point.

Fairfax Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 14 (%) 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 Eastwood Bio and Fairfax Financial

The main advantage of trading using opposite Eastwood Bio and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastwood Bio 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 Eastwood Bio Medical Canada 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.