Correlation Between Caribbean Utilities and Fairfax Financial
Can any of the company-specific risk be diversified away by investing in both Caribbean Utilities 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 Caribbean Utilities and Fairfax Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caribbean Utilities and Fairfax Financial Holdings, you can compare the effects of market volatilities on Caribbean Utilities 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 Caribbean Utilities with a short position of Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caribbean Utilities and Fairfax Financial.
Diversification Opportunities for Caribbean Utilities and Fairfax Financial
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caribbean and Fairfax is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Caribbean Utilities and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and Caribbean Utilities 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 Caribbean Utilities 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 Caribbean Utilities i.e., Caribbean Utilities and Fairfax Financial go up and down completely randomly.
Pair Corralation between Caribbean Utilities and Fairfax Financial
Assuming the 90 days trading horizon Caribbean Utilities is expected to generate 1.59 times less return on investment than Fairfax Financial. In addition to that, Caribbean Utilities is 3.73 times more volatile than Fairfax Financial Holdings. It trades about 0.02 of its total potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.09 per unit of volatility. If you would invest 1,394 in Fairfax Financial Holdings on August 27, 2024 and sell it today you would earn a total of 715.00 from holding Fairfax Financial Holdings or generate 51.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.95% |
| Values | Daily Returns |
Caribbean Utilities vs. Fairfax Financial Holdings
Performance |
| Timeline |
| Caribbean Utilities |
| Fairfax Financial |
Caribbean Utilities and Fairfax Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caribbean Utilities and Fairfax Financial
The main advantage of trading using opposite Caribbean Utilities and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caribbean Utilities 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.| Caribbean Utilities vs. Maxim Power Corp | Caribbean Utilities vs. ATCO | Caribbean Utilities vs. Capstone Infrastructure Corp | Caribbean Utilities vs. Richards Packaging Income |
| Fairfax Financial vs. Forstrong Global Income | Fairfax Financial vs. BMO Aggregate Bond | Fairfax Financial vs. Terreno Resources Corp | Fairfax Financial vs. iShares Canadian HYBrid |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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