Correlation Between The Fairholme and Mh Elite

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

Diversification Opportunities for The Fairholme and Mh Elite

0.2

Correlation Coefficient

The Fairholme  Mh Elite

Modest diversification

The 3 months correlation between THE and MHELX is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding The Fairholme Focused and Mh Elite Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mh Elite Small 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 Mh Elite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mh Elite Small has no effect on the direction of The Fairholme i.e., The Fairholme and Mh Elite go up and down completely randomly.

Pair Corralation between The Fairholme and Mh Elite

Assuming the 90 days horizon The Fairholme Focused is expected to generate 0.37 times more return on investment than Mh Elite. However, The Fairholme Focused is 2.68 times less risky than Mh Elite. It trades about 0.25 of its potential returns per unit of risk. Mh Elite Small is currently generating about -0.02 per unit of risk. If you would invest  1,312  in The Fairholme Focused on October 25, 2024 and sell it today you would earn a total of  123.00  from holding The Fairholme Focused or generate 9.38% return on investment over 90 days.

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

The Fairholme Focused  vs.  Mh Elite Small

Fairholme Focused

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Fairholme Focused are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, The Fairholme may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Mh Elite Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mh Elite Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Mh Elite 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 Mh Elite

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

The idea behind The Fairholme Focused and Mh Elite Small 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.