Correlation Between Olympia Financial and Fairfax Financial

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

By analyzing existing cross correlation between Olympia Financial Group and Fairfax Financial Holdings, you can compare the effects of market volatilities on Olympia Financial and Fairfax Financial 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 Olympia Financial with a short position of Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Olympia Financial and Fairfax Financial.

Diversification Opportunities for Olympia Financial and Fairfax Financial

0.87

Correlation Coefficient

Olympia Financial  Fairfax Financial

Very poor diversification

The 3 months correlation between Olympia and Fairfax is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Olympia Financial Group and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and Olympia 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 Olympia Financial Group are associated (or correlated) with Fairfax Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairfax Financial has no effect on the direction of Olympia Financial i.e., Olympia Financial and Fairfax Financial go up and down completely randomly.

Pair Corralation between Olympia Financial and Fairfax Financial

Assuming the 90 days trading horizon Olympia Financial Group is expected to generate 2.39 times more return on investment than Fairfax Financial. However, Olympia Financial is 2.39 times more volatile than Fairfax Financial Holdings. It trades about 0.07 of its potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.1 per unit of risk. If you would invest  6,052  in Olympia Financial Group on October 24, 2024 and sell it today you would earn a total of  4,848  from holding Olympia Financial Group or generate 80.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.17%
Values	Daily Returns

Olympia Financial Group  vs.  Fairfax Financial Holdings

Olympia Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Olympia Financial Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Olympia Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Fairfax Financial

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Fairfax Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat unfluctuating technical indicators, Fairfax Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Olympia Financial and Fairfax Financial

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

The idea behind Olympia Financial Group and Fairfax Financial Holdings 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.

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.