Correlation Between Fairfax Financial and Aptose Biosciences

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

Diversification Opportunities for Fairfax Financial and Aptose Biosciences

-0.95

Correlation Coefficient

Fairfax Financial  Aptose Biosciences

Pay attention - limited upside

The 3 months correlation between Fairfax and Aptose is -0.95. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Aptose Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptose Biosciences 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 Aptose Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptose Biosciences has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Aptose Biosciences go up and down completely randomly.

Pair Corralation between Fairfax Financial and Aptose Biosciences

Assuming the 90 days trading horizon Fairfax Financial is expected to generate 15.0 times less return on investment than Aptose Biosciences. But when comparing it to its historical volatility, Fairfax Financial Holdings is 47.71 times less risky than Aptose Biosciences. It trades about 0.09 of its potential returns per unit of risk. Aptose Biosciences is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,200  in Aptose Biosciences on September 23, 2024 and sell it today you would lose (1,158) from holding Aptose Biosciences or give up 96.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.8%
Values	Daily Returns

Fairfax Financial Holdings  vs.  Aptose Biosciences

Fairfax Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 14 (%) 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.

Aptose Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aptose Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Aptose Biosciences 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 Aptose Biosciences

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

The idea behind Fairfax Financial Holdings and Aptose Biosciences 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..