Correlation Between Ford and Fairfax Fin
Can any of the company-specific risk be diversified away by investing in both Ford and Fairfax Fin 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 Ford and Fairfax Fin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Fairfax Fin Hld, you can compare the effects of market volatilities on Ford and Fairfax Fin 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 Ford with a short position of Fairfax Fin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Fairfax Fin.
Diversification Opportunities for Ford and Fairfax Fin
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Fairfax is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Fairfax Fin Hld in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Fin Hld and Ford 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 Ford Motor are associated (or correlated) with Fairfax Fin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairfax Fin Hld has no effect on the direction of Ford i.e., Ford and Fairfax Fin go up and down completely randomly.
Pair Corralation between Ford and Fairfax Fin
Taking into account the 90-day investment horizon Ford is expected to generate 4.71 times less return on investment than Fairfax Fin. In addition to that, Ford is 1.71 times more volatile than Fairfax Fin Hld. It trades about 0.01 of its total potential returns per unit of risk. Fairfax Fin Hld is currently generating about 0.1 per unit of volatility. If you would invest 1,782 in Fairfax Fin Hld on August 28, 2024 and sell it today you would earn a total of 343.00 from holding Fairfax Fin Hld or generate 19.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Ford Motor vs. Fairfax Fin Hld
Performance |
| Timeline |
| Ford Motor |
| Fairfax Fin Hld |
Ford and Fairfax Fin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Fairfax Fin
The main advantage of trading using opposite Ford and Fairfax Fin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Fairfax Fin 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 Fin will offset losses from the drop in Fairfax Fin's long position.The idea behind Ford Motor and Fairfax Fin Hld pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Fairfax Fin vs. Fairfax Financial Holdings | Fairfax Fin vs. Fairfax Financial Holdings | Fairfax Fin vs. Fairfax Financial Holdings | Fairfax Fin vs. Fairfax Financial Holdings |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing |