Correlation Between Fairfax Financial and Lion Electric
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Lion Electric 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 Lion Electric 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 Lion Electric Corp, you can compare the effects of market volatilities on Fairfax Financial and Lion Electric 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 Lion Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Lion Electric.
Diversification Opportunities for Fairfax Financial and Lion Electric
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Fairfax and Lion is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Lion Electric Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Electric Corp 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 Lion Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Electric Corp has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Lion Electric go up and down completely randomly.
Pair Corralation between Fairfax Financial and Lion Electric
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.17 times more return on investment than Lion Electric. However, Fairfax Financial Holdings is 5.95 times less risky than Lion Electric. It trades about 0.12 of its potential returns per unit of risk. Lion Electric Corp is currently generating about -0.07 per unit of risk. If you would invest 1,493 in Fairfax Financial Holdings on September 26, 2024 and sell it today you would earn a total of 707.00 from holding Fairfax Financial Holdings or generate 47.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Fairfax Financial Holdings vs. Lion Electric Corp
Performance |
Timeline |
Fairfax Financial |
Lion Electric Corp |
Fairfax Financial and Lion Electric Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Fairfax Financial and Lion Electric
The main advantage of trading using opposite Fairfax Financial and Lion Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Lion Electric 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 Lion Electric will offset losses from the drop in Lion Electric's long position.Fairfax Financial vs. Ocumetics Technology Corp | Fairfax Financial vs. Guru Organic Energy | Fairfax Financial vs. High Liner Foods | Fairfax Financial vs. Xtract One Technologies |
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Check out your portfolio center.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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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