Correlation Between Safety Insurance and Fairfax Financial

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

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

Diversification Opportunities for Safety Insurance and Fairfax Financial

0.0

Correlation Coefficient

Safety Insurance  Fairfax Financial

Pay attention - limited upside

The 3 months correlation between Safety and Fairfax is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Safety Insurance 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 Safety Insurance 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 Safety Insurance 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 Safety Insurance i.e., Safety Insurance and Fairfax Financial go up and down completely randomly.

Pair Corralation between Safety Insurance and Fairfax Financial

If you would invest  7,218  in Safety Insurance Group on October 24, 2024 and sell it today you would earn a total of  282.00  from holding Safety Insurance Group or generate 3.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.67%
Values	Daily Returns

Safety Insurance Group  vs.  Fairfax Financial Holdings

Safety Insurance

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Safety Insurance Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Safety Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Fairfax Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Fairfax Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Safety Insurance and Fairfax Financial

The main advantage of trading using opposite Safety Insurance and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safety Insurance 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 Safety Insurance 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.