Correlation Between Fairfax Fin and Gear Energy
Can any of the company-specific risk be diversified away by investing in both Fairfax Fin and Gear Energy 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 Gear Energy 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 Gear Energy, you can compare the effects of market volatilities on Fairfax Fin and Gear Energy 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 Gear Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Fin and Gear Energy.
Diversification Opportunities for Fairfax Fin and Gear Energy
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fairfax and Gear is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Fin Hld and Gear Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gear Energy 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 Gear Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gear Energy has no effect on the direction of Fairfax Fin i.e., Fairfax Fin and Gear Energy go up and down completely randomly.
Pair Corralation between Fairfax Fin and Gear Energy
Assuming the 90 days trading horizon Fairfax Fin Hld is expected to generate 0.54 times more return on investment than Gear Energy. However, Fairfax Fin Hld is 1.86 times less risky than Gear Energy. It trades about 0.36 of its potential returns per unit of risk. Gear Energy is currently generating about 0.01 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 Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Fin Hld vs. Gear Energy
Performance |
| Timeline |
| Fairfax Fin Hld |
| Gear Energy |
Fairfax Fin and Gear Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Fin and Gear Energy
The main advantage of trading using opposite Fairfax Fin and Gear Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Fin position performs unexpectedly, Gear Energy 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 Gear Energy will offset losses from the drop in Gear Energy's long position.| Fairfax Fin vs. Income Financial Trust | Fairfax Fin vs. Reliq Health Technologies | Fairfax Fin vs. iA Financial | Fairfax Fin vs. UnitedHealth Group CDR |
| Gear Energy vs. Yangarra Resources | Gear Energy vs. iShares Canadian HYBrid | Gear Energy vs. Altagas Cum Red | Gear Energy vs. European Residential Real |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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