Correlation Between Fairfax Financial and Apple

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

Diversification Opportunities for Fairfax Financial and Apple

0.6

Correlation Coefficient

Fairfax Financial  Apple

Poor diversification

The 3 months correlation between Fairfax and Apple is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Apple Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc CDR 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc CDR has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Apple go up and down completely randomly.

Pair Corralation between Fairfax Financial and Apple

Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.67 times more return on investment than Apple. However, Fairfax Financial Holdings is 1.49 times less risky than Apple. It trades about 0.12 of its potential returns per unit of risk. Apple Inc CDR is currently generating about 0.04 per unit of risk. If you would invest  1,622  in Fairfax Financial Holdings on October 22, 2024 and sell it today you would earn a total of  828.00  from holding Fairfax Financial Holdings or generate 51.05% return on investment over 90 days.

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

Fairfax Financial Holdings  vs.  Apple Inc CDR

Fairfax Financial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical indicators, Fairfax Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Apple Inc CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apple Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Apple is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fairfax Financial and Apple

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

The idea behind Fairfax Financial Holdings and Apple Inc CDR 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.