Correlation Between Brookfield Infrastructure and Fairfax Financial
Can any of the company-specific risk be diversified away by investing in both Brookfield Infrastructure 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 Brookfield Infrastructure and Fairfax Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookfield Infrastructure Partners and Fairfax Financial Holdings, you can compare the effects of market volatilities on Brookfield Infrastructure 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 Brookfield Infrastructure with a short position of Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Infrastructure and Fairfax Financial.
Diversification Opportunities for Brookfield Infrastructure and Fairfax Financial
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Brookfield and Fairfax is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Infrastructure Part and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and Brookfield Infrastructure 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 Brookfield Infrastructure Partners 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 Brookfield Infrastructure i.e., Brookfield Infrastructure and Fairfax Financial go up and down completely randomly.
Pair Corralation between Brookfield Infrastructure and Fairfax Financial
Assuming the 90 days trading horizon Brookfield Infrastructure is expected to generate 13.72 times less return on investment than Fairfax Financial. But when comparing it to its historical volatility, Brookfield Infrastructure Partners is 3.92 times less risky than Fairfax Financial. It trades about 0.13 of its potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest 1,740 in Fairfax Financial Holdings on September 13, 2024 and sell it today you would earn a total of 555.00 from holding Fairfax Financial Holdings or generate 31.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brookfield Infrastructure Part vs. Fairfax Financial Holdings
Performance |
| Timeline |
| Brookfield Infrastructure |
| Fairfax Financial |
Brookfield Infrastructure and Fairfax Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookfield Infrastructure and Fairfax Financial
The main advantage of trading using opposite Brookfield Infrastructure and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Infrastructure 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.| Brookfield Infrastructure vs. UnitedHealth Group CDR | Brookfield Infrastructure vs. Aya Gold Silver | Brookfield Infrastructure vs. Canlan Ice Sports | Brookfield Infrastructure vs. Leveljump Healthcare Corp |
| Fairfax Financial vs. Metalero Mining Corp | Fairfax Financial vs. Getty Copper | Fairfax Financial vs. Bragg Gaming Group | Fairfax Financial vs. Gamehost |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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