Correlation Between Rocky Mountain and Fairfax Financial

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

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

Diversification Opportunities for Rocky Mountain and Fairfax Financial

-0.78

Correlation Coefficient

Rocky Mountain  Fairfax Financial

Pay attention - limited upside

The 3 months correlation between Rocky and Fairfax is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Mountain Liquor and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and Rocky Mountain 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 Rocky Mountain Liquor 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 Rocky Mountain i.e., Rocky Mountain and Fairfax Financial go up and down completely randomly.

Pair Corralation between Rocky Mountain and Fairfax Financial

Assuming the 90 days horizon Rocky Mountain Liquor is expected to generate 5.2 times more return on investment than Fairfax Financial. However, Rocky Mountain is 5.2 times more volatile than Fairfax Financial Holdings. It trades about 0.02 of its potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.05 per unit of risk. If you would invest  10.00  in Rocky Mountain Liquor on October 7, 2024 and sell it today you would earn a total of  0.00  from holding Rocky Mountain Liquor or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Rocky Mountain Liquor  vs.  Fairfax Financial Holdings

Rocky Mountain Liquor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Mountain Liquor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Fairfax Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Fairfax Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rocky Mountain and Fairfax Financial

The main advantage of trading using opposite Rocky Mountain and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocky Mountain 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 Rocky Mountain Liquor 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.