Correlation Between The Fairholme and Gurtin National

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

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

Diversification Opportunities for The Fairholme and Gurtin National

0.54

Correlation Coefficient

The Fairholme  Gurtin National

Very weak diversification

The 3 months correlation between The and Gurtin is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding The Fairholme Focused and Gurtin National Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gurtin National Municipal and The Fairholme 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 The Fairholme Focused are associated (or correlated) with Gurtin National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gurtin National Municipal has no effect on the direction of The Fairholme i.e., The Fairholme and Gurtin National go up and down completely randomly.

Pair Corralation between The Fairholme and Gurtin National

Assuming the 90 days horizon The Fairholme Focused is expected to generate 1.97 times more return on investment than Gurtin National. However, The Fairholme is 1.97 times more volatile than Gurtin National Municipal. It trades about 0.11 of its potential returns per unit of risk. Gurtin National Municipal is currently generating about 0.05 per unit of risk. If you would invest  1,116  in The Fairholme Focused on October 11, 2024 and sell it today you would earn a total of  273.00  from holding The Fairholme Focused or generate 24.46% return on investment over 90 days.

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

The Fairholme Focused  vs.  Gurtin National Municipal

Fairholme Focused

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Fairholme Focused are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, The Fairholme is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gurtin National Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with The Fairholme and Gurtin National

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

The idea behind The Fairholme Focused and Gurtin National Municipal 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.