Correlation Between Fairfax Financial and Jack Nathan

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

Diversification Opportunities for Fairfax Financial and Jack Nathan

-0.29

Correlation Coefficient

Fairfax Financial  Jack Nathan

Very good diversification

The 3 months correlation between Fairfax and Jack is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Jack Nathan Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jack Nathan Medical 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 Jack Nathan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jack Nathan Medical has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Jack Nathan go up and down completely randomly.

Pair Corralation between Fairfax Financial and Jack Nathan

Assuming the 90 days trading horizon Fairfax Financial is expected to generate 8.74 times less return on investment than Jack Nathan. But when comparing it to its historical volatility, Fairfax Financial Holdings is 14.16 times less risky than Jack Nathan. It trades about 0.12 of its potential returns per unit of risk. Jack Nathan Medical is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Jack Nathan Medical on December 22, 2024 and sell it today you would lose (0.50) from holding Jack Nathan Medical or give up 25.0% of portfolio value over 90 days.

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

Fairfax Financial Holdings  vs.  Jack Nathan Medical

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 abnormal technical indicators, Fairfax Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Jack Nathan Medical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jack Nathan Medical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Jack Nathan showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fairfax Financial and Jack Nathan

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

The idea behind Fairfax Financial Holdings and Jack Nathan Medical 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.