Correlation Between Fairfax Fin and Bce
Can any of the company-specific risk be diversified away by investing in both Fairfax Fin and Bce 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 Fairfax Fin and Bce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fairfax Fin Hld and Bce Inc Pref, you can compare the effects of market volatilities on Fairfax Fin and Bce 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 Fairfax Fin with a short position of Bce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Fin and Bce.
Diversification Opportunities for Fairfax Fin and Bce
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Fairfax and Bce is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Fin Hld and Bce Inc Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bce Inc Pref and Fairfax Fin 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 Fairfax Fin Hld are associated (or correlated) with Bce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bce Inc Pref has no effect on the direction of Fairfax Fin i.e., Fairfax Fin and Bce go up and down completely randomly.
Pair Corralation between Fairfax Fin and Bce
Assuming the 90 days trading horizon Fairfax Fin Hld is expected to generate 3.12 times more return on investment than Bce. However, Fairfax Fin is 3.12 times more volatile than Bce Inc Pref. It trades about 0.29 of its potential returns per unit of risk. Bce Inc Pref is currently generating about 0.21 per unit of risk. If you would invest 2,340 in Fairfax Fin Hld on September 12, 2024 and sell it today you would earn a total of 184.00 from holding Fairfax Fin Hld or generate 7.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Fin Hld vs. Bce Inc Pref
Performance |
| Timeline |
| Fairfax Fin Hld |
| Bce Inc Pref |
Fairfax Fin and Bce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Fin and Bce
The main advantage of trading using opposite Fairfax Fin and Bce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Fin position performs unexpectedly, Bce 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 Bce will offset losses from the drop in Bce's long position.| Fairfax Fin vs. Intact Financial | Fairfax Fin vs. Fairfax Financial Holdings | Fairfax Fin vs. Fairfax Financial Holdings | Fairfax Fin vs. Intact Financial Corp |
| Bce vs. Canaf Investments | Bce vs. SalesforceCom CDR | Bce vs. Ocumetics Technology Corp | Bce vs. Quorum Information Technologies |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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