Correlation Between Fairfax Fin and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Fairfax Fin and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Fairfax Fin and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Fin and Dow Jones.
Diversification Opportunities for Fairfax Fin and Dow Jones
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fairfax and Dow is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Fin Hld and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Fairfax Fin i.e., Fairfax Fin and Dow Jones go up and down completely randomly.
Pair Corralation between Fairfax Fin and Dow Jones
Assuming the 90 days trading horizon Fairfax Fin Hld is expected to generate 1.37 times more return on investment than Dow Jones. However, Fairfax Fin is 1.37 times more volatile than Dow Jones Industrial. It trades about 0.35 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.26 per unit of risk. If you would invest 2,265 in Fairfax Fin Hld on August 29, 2024 and sell it today you would earn a total of 245.00 from holding Fairfax Fin Hld or generate 10.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Fin Hld vs. Dow Jones Industrial
Performance |
| Timeline |
Fairfax Fin and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Fairfax Fin Hld
Pair trading matchups for Fairfax Fin
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Fairfax Fin and Dow Jones
The main advantage of trading using opposite Fairfax Fin and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Fin position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Fairfax Fin vs. Hemisphere Energy | Fairfax Fin vs. Cogeco Communications | Fairfax Fin vs. Computer Modelling Group | Fairfax Fin vs. Canso Credit Trust |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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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