Correlation Between Cogeco Communications and Fairfax Financial
Can any of the company-specific risk be diversified away by investing in both Cogeco Communications 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 Cogeco Communications and Fairfax Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cogeco Communications and Fairfax Financial Holdings, you can compare the effects of market volatilities on Cogeco Communications 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 Cogeco Communications with a short position of Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogeco Communications and Fairfax Financial.
Diversification Opportunities for Cogeco Communications and Fairfax Financial
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cogeco and Fairfax is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Cogeco Communications and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and Cogeco Communications 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 Cogeco Communications 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 Cogeco Communications i.e., Cogeco Communications and Fairfax Financial go up and down completely randomly.
Pair Corralation between Cogeco Communications and Fairfax Financial
Assuming the 90 days trading horizon Cogeco Communications is expected to generate 5.28 times less return on investment than Fairfax Financial. But when comparing it to its historical volatility, Cogeco Communications is 1.77 times less risky than Fairfax Financial. It trades about 0.09 of its potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,885 in Fairfax Financial Holdings on September 2, 2024 and sell it today you would earn a total of 261.00 from holding Fairfax Financial Holdings or generate 13.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cogeco Communications vs. Fairfax Financial Holdings
Performance |
| Timeline |
| Cogeco Communications |
| Fairfax Financial |
Cogeco Communications and Fairfax Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cogeco Communications and Fairfax Financial
The main advantage of trading using opposite Cogeco Communications and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogeco Communications 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.| Cogeco Communications vs. Cogeco Inc | Cogeco Communications vs. Quebecor | Cogeco Communications vs. Transcontinental | Cogeco Communications vs. Stella Jones |
| Fairfax Financial vs. Cogeco Communications | Fairfax Financial vs. Data Communications Management | Fairfax Financial vs. Western Copper and | Fairfax Financial vs. Nicola Mining |
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 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.
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