Correlation Between Fairfax Financial and Portofino Resources

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

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

Diversification Opportunities for Fairfax Financial and Portofino Resources

-0.82

Correlation Coefficient

Fairfax Financial  Portofino Resources

Pay attention - limited upside

The 3 months correlation between Fairfax and Portofino is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Portofino Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portofino Resources and Fairfax Financial 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 Financial Holdings are associated (or correlated) with Portofino Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portofino Resources has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Portofino Resources go up and down completely randomly.

Pair Corralation between Fairfax Financial and Portofino Resources

Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to under-perform the Portofino Resources. But the preferred stock apears to be less risky and, when comparing its historical volatility, Fairfax Financial Holdings is 46.9 times less risky than Portofino Resources. The preferred stock trades about -0.19 of its potential returns per unit of risk. The Portofino Resources is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1.50  in Portofino Resources on October 4, 2024 and sell it today you would earn a total of  0.00  from holding Portofino Resources or generate 0.0% return on investment over 90 days.

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

Fairfax Financial Holdings  vs.  Portofino Resources

Fairfax Financial

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal technical indicators, Fairfax Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Portofino Resources

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Portofino Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Portofino Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fairfax Financial and Portofino Resources

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

The idea behind Fairfax Financial Holdings and Portofino Resources 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.