Correlation Between Brompton European and Fairfax Financial
Can any of the company-specific risk be diversified away by investing in both Brompton European 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 Brompton European and Fairfax Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brompton European Dividend and Fairfax Financial Holdings, you can compare the effects of market volatilities on Brompton European 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 Brompton European with a short position of Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton European and Fairfax Financial.
Diversification Opportunities for Brompton European and Fairfax Financial
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Brompton and Fairfax is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Brompton European Dividend and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and Brompton European 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 Brompton European Dividend 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 Brompton European i.e., Brompton European and Fairfax Financial go up and down completely randomly.
Pair Corralation between Brompton European and Fairfax Financial
Assuming the 90 days trading horizon Brompton European Dividend is expected to under-perform the Fairfax Financial. But the etf apears to be less risky and, when comparing its historical volatility, Brompton European Dividend is 1.99 times less risky than Fairfax Financial. The etf trades about -0.02 of its potential returns per unit of risk. The Fairfax Financial Holdings is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 1,800 in Fairfax Financial Holdings on August 31, 2024 and sell it today you would earn a total of 420.00 from holding Fairfax Financial Holdings or generate 23.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brompton European Dividend vs. Fairfax Financial Holdings
Performance |
| Timeline |
| Brompton European |
| Fairfax Financial |
Brompton European and Fairfax Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brompton European and Fairfax Financial
The main advantage of trading using opposite Brompton European and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brompton European 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.| Brompton European vs. Brompton Global Dividend | Brompton European vs. Global Healthcare Income | Brompton European vs. Tech Leaders Income | Brompton European vs. Brompton North American |
| Fairfax Financial vs. Fairfax Financial Holdings | Fairfax Financial vs. Fairfax Financial Holdings | Fairfax Financial vs. iShares Canadian HYBrid | Fairfax Financial vs. Brompton European Dividend |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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