Correlation Between Fairfax Fin and Fairfax Fin

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

Diversification Opportunities for Fairfax Fin and Fairfax Fin

0.92

Correlation Coefficient

Fairfax Fin  Fairfax Fin

Almost no diversification

The 3 months correlation between Fairfax and Fairfax is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Fin Hld and Fairfax Fin Hld in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Fin Hld 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 Fairfax Fin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairfax Fin Hld has no effect on the direction of Fairfax Fin i.e., Fairfax Fin and Fairfax Fin go up and down completely randomly.

Pair Corralation between Fairfax Fin and Fairfax Fin

Assuming the 90 days trading horizon Fairfax Fin Hld is expected to generate 1.47 times more return on investment than Fairfax Fin. However, Fairfax Fin is 1.47 times more volatile than Fairfax Fin Hld. It trades about 0.13 of its potential returns per unit of risk. Fairfax Fin Hld is currently generating about 0.16 per unit of risk. If you would invest  1,494  in Fairfax Fin Hld on September 12, 2024 and sell it today you would earn a total of  693.00  from holding Fairfax Fin Hld or generate 46.39% return on investment over 90 days.

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

Fairfax Fin Hld  vs.  Fairfax Fin Hld

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 abnormal technical indicators, Fairfax Fin sustained solid returns over the last few months and may actually be approaching a breakup point.

Fairfax Fin Hld

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Fin Hld are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Fairfax Fin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fairfax Fin and Fairfax Fin

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

The idea behind Fairfax Fin Hld and Fairfax Fin Hld 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 Stocks Directory module to find actively traded stocks across global markets.