Correlation Between Xtract One and Fairfax Fin

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

By analyzing existing cross correlation between Xtract One Technologies and Fairfax Fin Hld, you can compare the effects of market volatilities on Xtract One 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 Xtract One with a short position of Fairfax Fin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtract One and Fairfax Fin.

Diversification Opportunities for Xtract One and Fairfax Fin

-0.56

Correlation Coefficient

Xtract One  Fairfax Fin

Excellent diversification

The 3 months correlation between Xtract and Fairfax is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Xtract One Technologies 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 Xtract One 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 Xtract One Technologies 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 Xtract One i.e., Xtract One and Fairfax Fin go up and down completely randomly.

Pair Corralation between Xtract One and Fairfax Fin

Assuming the 90 days trading horizon Xtract One Technologies is expected to under-perform the Fairfax Fin. In addition to that, Xtract One is 4.81 times more volatile than Fairfax Fin Hld. It trades about -0.01 of its total potential returns per unit of risk. Fairfax Fin Hld is currently generating about 0.13 per unit of volatility. If you would invest  1,943  in Fairfax Fin Hld on October 5, 2024 and sell it today you would earn a total of  556.00  from holding Fairfax Fin Hld or generate 28.62% return on investment over 90 days.

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

Xtract One Technologies  vs.  Fairfax Fin Hld

Xtract One Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtract One Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Fairfax Fin Hld

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Fin Hld are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal technical indicators, Fairfax Fin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtract One and Fairfax Fin

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

The idea behind Xtract One Technologies and Fairfax Fin Hld 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.