Correlation Between Fairfax Financial and Gatos Silver

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

Diversification Opportunities for Fairfax Financial and Gatos Silver

-0.42

Correlation Coefficient

Fairfax Financial  Gatos Silver

Very good diversification

The 3 months correlation between Fairfax and Gatos is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Gatos Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gatos Silver 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 Gatos Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gatos Silver has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Gatos Silver go up and down completely randomly.

Pair Corralation between Fairfax Financial and Gatos Silver

Assuming the 90 days trading horizon Fairfax Financial is expected to generate 2.85 times less return on investment than Gatos Silver. But when comparing it to its historical volatility, Fairfax Financial Holdings is 3.42 times less risky than Gatos Silver. It trades about 0.1 of its potential returns per unit of risk. Gatos Silver is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  573.00  in Gatos Silver on September 26, 2024 and sell it today you would earn a total of  1,461  from holding Gatos Silver or generate 254.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Fairfax Financial Holdings  vs.  Gatos Silver

Fairfax Financial

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Fairfax Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Gatos Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gatos Silver has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Gatos Silver is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Fairfax Financial and Gatos Silver

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

The idea behind Fairfax Financial Holdings and Gatos Silver 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.