Correlation Between Fairfax Fin and Senvest Capital

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

Diversification Opportunities for Fairfax Fin and Senvest Capital

0.67

Correlation Coefficient

Fairfax Fin  Senvest Capital

Poor diversification

The 3 months correlation between Fairfax and Senvest is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Fin Hld and Senvest Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senvest Capital 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 Senvest Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senvest Capital has no effect on the direction of Fairfax Fin i.e., Fairfax Fin and Senvest Capital go up and down completely randomly.

Pair Corralation between Fairfax Fin and Senvest Capital

Assuming the 90 days trading horizon Fairfax Fin Hld is expected to generate 1.71 times more return on investment than Senvest Capital. However, Fairfax Fin is 1.71 times more volatile than Senvest Capital. It trades about 0.19 of its potential returns per unit of risk. Senvest Capital is currently generating about 0.15 per unit of risk. If you would invest  2,230  in Fairfax Fin Hld on September 15, 2024 and sell it today you would earn a total of  265.00  from holding Fairfax Fin Hld or generate 11.88% return on investment over 90 days.

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

Fairfax Fin Hld  vs.  Senvest Capital

Fairfax Fin Hld

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Fin Hld are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical indicators, Fairfax Fin may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Senvest Capital

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Senvest Capital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Senvest Capital is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Fairfax Fin and Senvest Capital

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

The idea behind Fairfax Fin Hld and Senvest Capital 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.

Check out your portfolio center.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.