Correlation Between Fairfax Fin and Income Financial
Can any of the company-specific risk be diversified away by investing in both Fairfax Fin and Income Financial 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 Income Financial 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 Income Financial Trust, you can compare the effects of market volatilities on Fairfax Fin and Income Financial 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 Income Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Fin and Income Financial.
Diversification Opportunities for Fairfax Fin and Income Financial
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fairfax and Income is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Fin Hld and Income Financial Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Financial Trust 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 Income Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Financial Trust has no effect on the direction of Fairfax Fin i.e., Fairfax Fin and Income Financial go up and down completely randomly.
Pair Corralation between Fairfax Fin and Income Financial
Assuming the 90 days trading horizon Fairfax Fin Hld is expected to generate 1.21 times more return on investment than Income Financial. However, Fairfax Fin is 1.21 times more volatile than Income Financial Trust. It trades about 0.46 of its potential returns per unit of risk. Income Financial Trust is currently generating about 0.33 per unit of risk. If you would invest 2,225 in Fairfax Fin Hld on September 1, 2024 and sell it today you would earn a total of 296.00 from holding Fairfax Fin Hld or generate 13.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Fin Hld vs. Income Financial Trust
Performance |
| Timeline |
| Fairfax Fin Hld |
| Income Financial Trust |
Fairfax Fin and Income Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Fin and Income Financial
The main advantage of trading using opposite Fairfax Fin and Income Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Fin position performs unexpectedly, Income Financial 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 Income Financial will offset losses from the drop in Income Financial's long position.| Fairfax Fin vs. AGF Management Limited | Fairfax Fin vs. Guru Organic Energy | Fairfax Fin vs. Enerev5 Metals | Fairfax Fin vs. Computer Modelling Group |
| Income Financial vs. Dividend Select 15 | Income Financial vs. Global Dividend Growth | Income Financial vs. Brompton Split Banc | Income Financial vs. Real Estate E Commerce |
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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