Correlation Between US Financial and Fairfax Fin
Can any of the company-specific risk be diversified away by investing in both US Financial and Fairfax Fin 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 US Financial and Fairfax Fin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Financial 15 and Fairfax Fin Hld, you can compare the effects of market volatilities on US Financial and Fairfax Fin 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 US Financial with a short position of Fairfax Fin. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Financial and Fairfax Fin.
Diversification Opportunities for US Financial and Fairfax Fin
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FTU-PB and Fairfax is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding US Financial 15 and Fairfax Fin Hld in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Fin Hld and US 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 US Financial 15 are associated (or correlated) with Fairfax Fin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairfax Fin Hld has no effect on the direction of US Financial i.e., US Financial and Fairfax Fin go up and down completely randomly.
Pair Corralation between US Financial and Fairfax Fin
Assuming the 90 days trading horizon US Financial is expected to generate 1.14 times less return on investment than Fairfax Fin. In addition to that, US Financial is 2.13 times more volatile than Fairfax Fin Hld. It trades about 0.04 of its total potential returns per unit of risk. Fairfax Fin Hld is currently generating about 0.09 per unit of volatility. If you would invest 1,753 in Fairfax Fin Hld on October 11, 2024 and sell it today you would earn a total of 746.00 from holding Fairfax Fin Hld or generate 42.56% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 99.19% |
Values | Daily Returns |
US Financial 15 vs. Fairfax Fin Hld
Performance |
Timeline |
US Financial 15 |
Fairfax Fin Hld |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
US Financial and Fairfax Fin Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with US Financial and Fairfax Fin
The main advantage of trading using opposite US Financial and Fairfax Fin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Financial position performs unexpectedly, Fairfax Fin 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 Fairfax Fin will offset losses from the drop in Fairfax Fin's long position.US Financial vs. North American Financial | US Financial vs. Prime Dividend Corp | US Financial vs. Canadian Life Companies | US Financial vs. Financial 15 Split |
Fairfax Fin vs. US Financial 15 | Fairfax Fin vs. Financial 15 Split | Fairfax Fin vs. HPQ Silicon Resources | Fairfax Fin vs. National Bank of |
Check out your portfolio center.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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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