Correlation Between Fairfax Fin and Ramp Metals

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

Diversification Opportunities for Fairfax Fin and Ramp Metals

0.31

Correlation Coefficient

Fairfax Fin  Ramp Metals

Weak diversification

The 3 months correlation between Fairfax and Ramp is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Fin Hld and Ramp Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramp Metals 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 Ramp Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramp Metals has no effect on the direction of Fairfax Fin i.e., Fairfax Fin and Ramp Metals go up and down completely randomly.

Pair Corralation between Fairfax Fin and Ramp Metals

Assuming the 90 days trading horizon Fairfax Fin Hld is expected to generate 0.86 times more return on investment than Ramp Metals. However, Fairfax Fin Hld is 1.16 times less risky than Ramp Metals. It trades about 0.34 of its potential returns per unit of risk. Ramp Metals is currently generating about 0.05 per unit of risk. If you would invest  1,748  in Fairfax Fin Hld on September 16, 2024 and sell it today you would earn a total of  421.00  from holding Fairfax Fin Hld or generate 24.08% return on investment over 90 days.

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

Fairfax Fin Hld  vs.  Ramp Metals

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.

Ramp Metals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ramp Metals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Ramp Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fairfax Fin and Ramp Metals

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

The idea behind Fairfax Fin Hld and Ramp Metals 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.