Correlation Between Fairfax Financial and Donegal Group

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

Diversification Opportunities for Fairfax Financial and Donegal Group

0.0

Correlation Coefficient

Fairfax Financial  Donegal Group

Pay attention - limited upside

The 3 months correlation between Fairfax and Donegal is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Donegal Group B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Donegal Group B 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 Donegal Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Donegal Group B has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Donegal Group go up and down completely randomly.

Pair Corralation between Fairfax Financial and Donegal Group

If you would invest  1,477  in Donegal Group B on December 30, 2024 and sell it today you would earn a total of  178.00  from holding Donegal Group B or generate 12.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Fairfax Financial Holdings  vs.  Donegal Group B

Fairfax Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fairfax Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Fairfax Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Donegal Group B

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Donegal Group B are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Donegal Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fairfax Financial and Donegal Group

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

The idea behind Fairfax Financial Holdings and Donegal Group B 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.