Correlation Between Fairfax Fin and Amotiv

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

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

Diversification Opportunities for Fairfax Fin and Amotiv

-0.86

Correlation Coefficient

Fairfax Fin  Amotiv

Pay attention - limited upside

The 3 months correlation between Fairfax and Amotiv is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Fin Hld and Amotiv Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amotiv Limited and Fairfax Fin 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 Fairfax Fin Hld are associated (or correlated) with Amotiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amotiv Limited has no effect on the direction of Fairfax Fin i.e., Fairfax Fin and Amotiv go up and down completely randomly.

Pair Corralation between Fairfax Fin and Amotiv

Assuming the 90 days trading horizon Fairfax Fin Hld is expected to generate 0.48 times more return on investment than Amotiv. However, Fairfax Fin Hld is 2.1 times less risky than Amotiv. It trades about 0.16 of its potential returns per unit of risk. Amotiv Limited is currently generating about -0.03 per unit of risk. If you would invest  2,122  in Fairfax Fin Hld on September 27, 2024 and sell it today you would earn a total of  378.00  from holding Fairfax Fin Hld or generate 17.81% return on investment over 90 days.

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

Fairfax Fin Hld  vs.  Amotiv Limited

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.

Amotiv Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amotiv Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Fairfax Fin and Amotiv

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

The idea behind Fairfax Fin Hld and Amotiv Limited 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.