Correlation Between Sparx Technology and Fairfax Financial

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

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

Diversification Opportunities for Sparx Technology and Fairfax Financial

0.92

Correlation Coefficient

Sparx Technology  Fairfax Financial

Almost no diversification

The 3 months correlation between Sparx and Fairfax is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Sparx Technology and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and Sparx Technology 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 Sparx Technology 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 Sparx Technology i.e., Sparx Technology and Fairfax Financial go up and down completely randomly.

Pair Corralation between Sparx Technology and Fairfax Financial

Assuming the 90 days trading horizon Sparx Technology is expected to generate 49.12 times more return on investment than Fairfax Financial. However, Sparx Technology is 49.12 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 0.12 per unit of risk. If you would invest  0.50  in Sparx Technology on October 2, 2024 and sell it today you would earn a total of  2,816  from holding Sparx Technology or generate 563100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Sparx Technology  vs.  Fairfax Financial Holdings

Sparx Technology

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparx Technology are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sparx Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Fairfax Financial

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical indicators, Fairfax Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sparx Technology and Fairfax Financial

The main advantage of trading using opposite Sparx Technology and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparx Technology 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 Sparx Technology 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.