Correlation Between Fairfax Financial and Computer Modelling

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

Diversification Opportunities for Fairfax Financial and Computer Modelling

-0.51

Correlation Coefficient

Fairfax Financial  Computer Modelling

Excellent diversification

The 3 months correlation between Fairfax and Computer is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Computer Modelling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computer Modelling 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 Computer Modelling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computer Modelling has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Computer Modelling go up and down completely randomly.

Pair Corralation between Fairfax Financial and Computer Modelling

Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.88 times more return on investment than Computer Modelling. However, Fairfax Financial Holdings is 1.14 times less risky than Computer Modelling. It trades about 0.1 of its potential returns per unit of risk. Computer Modelling Group is currently generating about -0.16 per unit of risk. If you would invest  2,222  in Fairfax Financial Holdings on December 26, 2024 and sell it today you would earn a total of  276.00  from holding Fairfax Financial Holdings or generate 12.42% return on investment over 90 days.

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

Fairfax Financial Holdings  vs.  Computer Modelling Group

Fairfax Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 7 (%) 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.

Computer Modelling

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Fairfax Financial and Computer Modelling

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

The idea behind Fairfax Financial Holdings and Computer Modelling Group 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.