Correlation Between Fairfax Fin and Birchtech Corp

Can any of the company-specific risk be diversified away by investing in both Fairfax Fin and Birchtech Corp 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 Birchtech Corp 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 Birchtech Corp, you can compare the effects of market volatilities on Fairfax Fin and Birchtech Corp 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 Birchtech Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Fin and Birchtech Corp.

Diversification Opportunities for Fairfax Fin and Birchtech Corp

0.44

Correlation Coefficient

Fairfax Fin  Birchtech Corp

Very weak diversification

The 3 months correlation between Fairfax and Birchtech is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Fin Hld and Birchtech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Birchtech Corp 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 Birchtech Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Birchtech Corp has no effect on the direction of Fairfax Fin i.e., Fairfax Fin and Birchtech Corp go up and down completely randomly.

Pair Corralation between Fairfax Fin and Birchtech Corp

Assuming the 90 days trading horizon Fairfax Fin Hld is expected to generate 0.06 times more return on investment than Birchtech Corp. However, Fairfax Fin Hld is 16.47 times less risky than Birchtech Corp. It trades about -0.17 of its potential returns per unit of risk. Birchtech Corp is currently generating about -0.14 per unit of risk. If you would invest  2,522  in Fairfax Fin Hld on October 4, 2024 and sell it today you would lose (23.00) from holding Fairfax Fin Hld or give up 0.91% of portfolio value over 90 days.

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

Fairfax Fin Hld  vs.  Birchtech Corp

Fairfax Fin Hld

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Fin Hld are ranked lower than 19 (%) 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.

Birchtech Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Birchtech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Fairfax Fin and Birchtech Corp

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

The idea behind Fairfax Fin Hld and Birchtech Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.