Correlation Between Infrastructure Fund and The Fairholme

Can any of the company-specific risk be diversified away by investing in both Infrastructure Fund and The Fairholme 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 Infrastructure Fund and The Fairholme into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Infrastructure Fund Retail and The Fairholme Fund, you can compare the effects of market volatilities on Infrastructure Fund and The Fairholme 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 Infrastructure Fund with a short position of The Fairholme. Check out your portfolio center. Please also check ongoing floating volatility patterns of Infrastructure Fund and The Fairholme.

Diversification Opportunities for Infrastructure Fund and The Fairholme

0.67

Correlation Coefficient

Infrastructure Fund  The Fairholme

Poor diversification

The 3 months correlation between Infrastructure and The is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Infrastructure Fund Retail and The Fairholme Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Fairholme and Infrastructure Fund 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 Infrastructure Fund Retail are associated (or correlated) with The Fairholme. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Fairholme has no effect on the direction of Infrastructure Fund i.e., Infrastructure Fund and The Fairholme go up and down completely randomly.

Pair Corralation between Infrastructure Fund and The Fairholme

Assuming the 90 days horizon Infrastructure Fund Retail is expected to generate 0.33 times more return on investment than The Fairholme. However, Infrastructure Fund Retail is 2.99 times less risky than The Fairholme. It trades about 0.0 of its potential returns per unit of risk. The Fairholme Fund is currently generating about -0.03 per unit of risk. If you would invest  2,368  in Infrastructure Fund Retail on December 4, 2024 and sell it today you would lose (3.00) from holding Infrastructure Fund Retail or give up 0.13% of portfolio value over 90 days.

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

Infrastructure Fund Retail  vs.  The Fairholme Fund

Infrastructure Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Infrastructure Fund Retail has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Infrastructure Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

The Fairholme

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Fairholme Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, The Fairholme is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Infrastructure Fund and The Fairholme

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

The idea behind Infrastructure Fund Retail and The Fairholme Fund 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.