Correlation Between The Fairholme and Clipper Fund

Can any of the company-specific risk be diversified away by investing in both The Fairholme and Clipper Fund 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 The Fairholme and Clipper Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Fairholme Fund and Clipper Fund Inc, you can compare the effects of market volatilities on The Fairholme and Clipper Fund 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 The Fairholme with a short position of Clipper Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Fairholme and Clipper Fund.

Diversification Opportunities for The Fairholme and Clipper Fund

0.5

Correlation Coefficient

The Fairholme  Clipper Fund

Very weak diversification

The 3 months correlation between The and Clipper is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding The Fairholme Fund and Clipper Fund Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clipper Fund and The Fairholme 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 The Fairholme Fund are associated (or correlated) with Clipper Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clipper Fund has no effect on the direction of The Fairholme i.e., The Fairholme and Clipper Fund go up and down completely randomly.

Pair Corralation between The Fairholme and Clipper Fund

Assuming the 90 days horizon The Fairholme is expected to generate 1.9 times less return on investment than Clipper Fund. In addition to that, The Fairholme is 1.46 times more volatile than Clipper Fund Inc. It trades about 0.02 of its total potential returns per unit of risk. Clipper Fund Inc is currently generating about 0.05 per unit of volatility. If you would invest  11,038  in Clipper Fund Inc on October 11, 2024 and sell it today you would earn a total of  2,766  from holding Clipper Fund Inc or generate 25.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

The Fairholme Fund  vs.  Clipper Fund Inc

The Fairholme

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Fairholme Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Clipper Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clipper Fund Inc has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Clipper Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with The Fairholme and Clipper Fund

The main advantage of trading using opposite The Fairholme and Clipper Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Fairholme position performs unexpectedly, Clipper Fund 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 Clipper Fund will offset losses from the drop in Clipper Fund's long position.

The idea behind The Fairholme Fund and Clipper Fund Inc 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.