Correlation Between Fairfax Financial and Mirasol Resources

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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

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between Fairfax and Mirasol is -0.34. 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 Holdings is expected to generate 0.27 times more return on investment than Mirasol Resources. However, Fairfax Financial Holdings is 3.69 times less risky than Mirasol Resources. It trades about 0.16 of its potential returns per unit of risk. Mirasol Resources is currently generating about 0.02 per unit of risk. If you would invest  2,209  in Fairfax Financial Holdings on September 6, 2024 and sell it today you would earn a total of  197.00  from holding Fairfax Financial Holdings or generate 8.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Fairfax Financial Holdings  vs.  Mirasol Resources

 Performance 
       Timeline  
Fairfax Financial 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical indicators, Fairfax Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Mirasol Resources 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Mirasol Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Mirasol Resources is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.
The idea behind Fairfax Financial Holdings and Mirasol Resources 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.
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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