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
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Brookfield and Fairfax is 0.84. 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 Partners is expected to generate 1.66 times more return on investment than Fairfax Financial. However, Brookfield Infrastructure is 1.66 times more volatile than Fairfax Financial Holdings. It trades about 0.12 of its potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.18 per unit of risk. If you would invest 2,425 in Brookfield Infrastructure Partners on September 26, 2024 and sell it today you would earn a total of 126.00 from holding Brookfield Infrastructure Partners or generate 5.2% 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. Chatham Rock Phosphate | Brookfield Infrastructure vs. Elixxer | Brookfield Infrastructure vs. Cielo Waste Solutions | Brookfield Infrastructure vs. Blockmate Ventures |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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