Correlation Between Fairfax Financial and Perseus Mining

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

Diversification Opportunities for Fairfax Financial and Perseus Mining

0.97

Correlation Coefficient

Fairfax Financial  Perseus Mining

Almost no diversification

The 3 months correlation between Fairfax and Perseus is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Perseus Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perseus Mining 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 Perseus Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perseus Mining has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Perseus Mining go up and down completely randomly.

Pair Corralation between Fairfax Financial and Perseus Mining

Assuming the 90 days trading horizon Fairfax Financial is expected to generate 14.76 times less return on investment than Perseus Mining. But when comparing it to its historical volatility, Fairfax Financial Holdings is 12.31 times less risky than Perseus Mining. It trades about 0.07 of its potential returns per unit of risk. Perseus Mining is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Perseus Mining on October 4, 2024 and sell it today you would earn a total of  211.00  from holding Perseus Mining or generate 1241.18% return on investment over 90 days.

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

Fairfax Financial Holdings  vs.  Perseus Mining

Fairfax Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 9 (%) 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 February 2025.

Perseus Mining

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Perseus Mining are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Perseus Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fairfax Financial and Perseus Mining

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

The idea behind Fairfax Financial Holdings and Perseus Mining 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.