Correlation Between Fairfax Financial and Mirasol Resources
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Mirasol Resources 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 Mirasol Resources 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 Mirasol Resources, you can compare the effects of market volatilities on Fairfax Financial and Mirasol Resources 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 Mirasol Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Mirasol Resources.
Diversification Opportunities for Fairfax Financial and Mirasol Resources
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Fairfax and Mirasol is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Mirasol Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mirasol Resources 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 Mirasol Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mirasol Resources has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Mirasol Resources go up and down completely randomly.
Pair Corralation between Fairfax Financial and Mirasol Resources
Assuming the 90 days trading horizon Fairfax Financial is expected to generate 1.34 times less return on investment than Mirasol Resources. But when comparing it to its historical volatility, Fairfax Financial Holdings is 2.17 times less risky than Mirasol Resources. It trades about 0.19 of its potential returns per unit of risk. Mirasol Resources is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 47.00 in Mirasol Resources on September 11, 2024 and sell it today you would earn a total of 11.00 from holding Mirasol Resources or generate 23.4% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Fairfax Financial Holdings vs. Mirasol Resources
Performance |
Timeline |
Fairfax Financial |
Mirasol Resources |
Fairfax Financial and Mirasol Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Fairfax Financial and Mirasol Resources
The main advantage of trading using opposite Fairfax Financial and Mirasol Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Mirasol Resources 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 Mirasol Resources will offset losses from the drop in Mirasol Resources' long position.Fairfax Financial vs. Western Investment | Fairfax Financial vs. CNJ Capital Investments | Fairfax Financial vs. Algoma Steel Group | Fairfax Financial vs. Verizon Communications CDR |
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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