Correlation Between Fairfax Financial and Azucar Minerals

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

Diversification Opportunities for Fairfax Financial and Azucar Minerals

0.62

Correlation Coefficient

Fairfax Financial  Azucar Minerals

Poor diversification

The 3 months correlation between Fairfax and Azucar is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Azucar Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azucar Minerals 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 Azucar Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azucar Minerals has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Azucar Minerals go up and down completely randomly.

Pair Corralation between Fairfax Financial and Azucar Minerals

Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.05 times more return on investment than Azucar Minerals. However, Fairfax Financial Holdings is 18.58 times less risky than Azucar Minerals. It trades about 0.0 of its potential returns per unit of risk. Azucar Minerals is currently generating about -0.05 per unit of risk. If you would invest  2,385  in Fairfax Financial Holdings on September 23, 2024 and sell it today you would earn a total of  0.00  from holding Fairfax Financial Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Fairfax Financial Holdings  vs.  Azucar Minerals

Fairfax Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 8 (%) 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 January 2025.

Azucar Minerals

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Fairfax Financial and Azucar Minerals

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

The idea behind Fairfax Financial Holdings and Azucar Minerals 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.