Correlation Between Fairfax Financial and Synex International

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

Diversification Opportunities for Fairfax Financial and Synex International

-0.68

Correlation Coefficient

Fairfax Financial  Synex International

Excellent diversification

The 3 months correlation between Fairfax and Synex is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Synex International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synex International 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 Synex International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synex International has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Synex International go up and down completely randomly.

Pair Corralation between Fairfax Financial and Synex International

Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.55 times more return on investment than Synex International. However, Fairfax Financial Holdings is 1.83 times less risky than Synex International. It trades about 0.14 of its potential returns per unit of risk. Synex International is currently generating about -0.03 per unit of risk. If you would invest  2,404  in Fairfax Financial Holdings on September 2, 2024 and sell it today you would earn a total of  96.00  from holding Fairfax Financial Holdings or generate 3.99% 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.  Synex International

Fairfax Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, Fairfax Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Synex International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Synex International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Synex International is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Fairfax Financial and Synex International

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

The idea behind Fairfax Financial Holdings and Synex International 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.