Correlation Between Fairfax Financial and AGF Management

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

Diversification Opportunities for Fairfax Financial and AGF Management

-0.04

Correlation Coefficient

Fairfax Financial  AGF Management

Good diversification

The 3 months correlation between Fairfax and AGF is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and AGF Management Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGF Management 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 AGF Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGF Management has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and AGF Management go up and down completely randomly.

Pair Corralation between Fairfax Financial and AGF Management

Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 1.5 times more return on investment than AGF Management. However, Fairfax Financial is 1.5 times more volatile than AGF Management Limited. It trades about 0.12 of its potential returns per unit of risk. AGF Management Limited is currently generating about 0.09 per unit of risk. If you would invest  2,169  in Fairfax Financial Holdings on December 1, 2024 and sell it today you would earn a total of  358.00  from holding Fairfax Financial Holdings or generate 16.51% return on investment over 90 days.

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

Fairfax Financial Holdings  vs.  AGF Management Limited

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 9 (%) 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.

AGF Management

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AGF Management Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, AGF Management may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Fairfax Financial and AGF Management

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

The idea behind Fairfax Financial Holdings and AGF Management Limited 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.