Correlation Between Fairfax Financial and Arizona Sonoran

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

Diversification Opportunities for Fairfax Financial and Arizona Sonoran

0.45

Correlation Coefficient

Fairfax Financial  Arizona Sonoran

Very weak diversification

The 3 months correlation between Fairfax and Arizona is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Arizona Sonoran Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arizona Sonoran Copper 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 Arizona Sonoran. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arizona Sonoran Copper has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Arizona Sonoran go up and down completely randomly.

Pair Corralation between Fairfax Financial and Arizona Sonoran

Assuming the 90 days trading horizon Fairfax Financial is expected to generate 14.82 times less return on investment than Arizona Sonoran. But when comparing it to its historical volatility, Fairfax Financial Holdings is 3.58 times less risky than Arizona Sonoran. It trades about 0.05 of its potential returns per unit of risk. Arizona Sonoran Copper is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  139.00  in Arizona Sonoran Copper on December 30, 2024 and sell it today you would earn a total of  89.00  from holding Arizona Sonoran Copper or generate 64.03% 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.  Arizona Sonoran Copper

Fairfax Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, Fairfax Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Arizona Sonoran Copper

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arizona Sonoran Copper are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Arizona Sonoran displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fairfax Financial and Arizona Sonoran

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

The idea behind Fairfax Financial Holdings and Arizona Sonoran Copper 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.