Correlation Between Fairfax Financial and Thinkific Labs

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

Diversification Opportunities for Fairfax Financial and Thinkific Labs

0.5

Correlation Coefficient

Fairfax Financial  Thinkific Labs

Very weak diversification

The 3 months correlation between Fairfax and Thinkific is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Thinkific Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thinkific Labs 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 Thinkific Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thinkific Labs has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Thinkific Labs go up and down completely randomly.

Pair Corralation between Fairfax Financial and Thinkific Labs

Assuming the 90 days trading horizon Fairfax Financial is expected to generate 1.52 times less return on investment than Thinkific Labs. But when comparing it to its historical volatility, Fairfax Financial Holdings is 4.38 times less risky than Thinkific Labs. It trades about 0.13 of its potential returns per unit of risk. Thinkific Labs is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  285.00  in Thinkific Labs on September 12, 2024 and sell it today you would earn a total of  20.00  from holding Thinkific Labs or generate 7.02% return on investment over 90 days.

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

Fairfax Financial Holdings  vs.  Thinkific Labs

Fairfax Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Fairfax Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Thinkific Labs

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Thinkific Labs are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Thinkific Labs may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fairfax Financial and Thinkific Labs

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

The idea behind Fairfax Financial Holdings and Thinkific Labs 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.