Correlation Between Fairfax Financial and Lion One

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

Diversification Opportunities for Fairfax Financial and Lion One

-0.65

Correlation Coefficient

Fairfax Financial  Lion One

Excellent diversification

The 3 months correlation between Fairfax and Lion is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Lion One Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion One Metals 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 One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion One Metals has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Lion One go up and down completely randomly.

Pair Corralation between Fairfax Financial and Lion One

Assuming the 90 days trading horizon Fairfax Financial is expected to generate 8.95 times less return on investment than Lion One. But when comparing it to its historical volatility, Fairfax Financial Holdings is 10.73 times less risky than Lion One. It trades about 0.28 of its potential returns per unit of risk. Lion One Metals is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Lion One Metals on October 22, 2024 and sell it today you would earn a total of  6.00  from holding Lion One Metals or generate 24.0% return on investment over 90 days.

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

Fairfax Financial Holdings  vs.  Lion One Metals

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.

Lion One Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion One Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Fairfax Financial and Lion One

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

The idea behind Fairfax Financial Holdings and Lion One Metals 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.