Correlation Between Fairfax Fin and American Hotel
Can any of the company-specific risk be diversified away by investing in both Fairfax Fin and American Hotel 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 American Hotel 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 American Hotel Income, you can compare the effects of market volatilities on Fairfax Fin and American Hotel 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 American Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Fin and American Hotel.
Diversification Opportunities for Fairfax Fin and American Hotel
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fairfax and American is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Fin Hld and American Hotel Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Hotel Income 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 American Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Hotel Income has no effect on the direction of Fairfax Fin i.e., Fairfax Fin and American Hotel go up and down completely randomly.
Pair Corralation between Fairfax Fin and American Hotel
Assuming the 90 days trading horizon Fairfax Fin Hld is expected to generate 0.19 times more return on investment than American Hotel. However, Fairfax Fin Hld is 5.34 times less risky than American Hotel. It trades about 0.16 of its potential returns per unit of risk. American Hotel Income is currently generating about 0.0 per unit of risk. If you would invest 1,819 in Fairfax Fin Hld on September 4, 2024 and sell it today you would earn a total of 703.00 from holding Fairfax Fin Hld or generate 38.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Fin Hld vs. American Hotel Income
Performance |
| Timeline |
| Fairfax Fin Hld |
| American Hotel Income |
Fairfax Fin and American Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Fin and American Hotel
The main advantage of trading using opposite Fairfax Fin and American Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Fin position performs unexpectedly, American Hotel 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 American Hotel will offset losses from the drop in American Hotel's long position.| Fairfax Fin vs. Intact Financial | Fairfax Fin vs. Fairfax Financial Holdings | Fairfax Fin vs. Intact Financial Corp |
| American Hotel vs. Slate Office REIT | American Hotel vs. BTB Real Estate | American Hotel vs. Inovalis Real Estate | American Hotel vs. True North Commercial |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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