Correlation Between Fairfax Fin and International Petroleum
Can any of the company-specific risk be diversified away by investing in both Fairfax Fin and International Petroleum 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 International Petroleum 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 International Petroleum Corp, you can compare the effects of market volatilities on Fairfax Fin and International Petroleum 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 International Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Fin and International Petroleum.
Diversification Opportunities for Fairfax Fin and International Petroleum
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fairfax and International is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Fin Hld and International Petroleum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Petroleum 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 International Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Petroleum has no effect on the direction of Fairfax Fin i.e., Fairfax Fin and International Petroleum go up and down completely randomly.
Pair Corralation between Fairfax Fin and International Petroleum
Assuming the 90 days trading horizon Fairfax Fin Hld is expected to generate 0.36 times more return on investment than International Petroleum. However, Fairfax Fin Hld is 2.78 times less risky than International Petroleum. It trades about 0.11 of its potential returns per unit of risk. International Petroleum Corp is currently generating about 0.02 per unit of risk. If you would invest 1,601 in Fairfax Fin Hld on August 30, 2024 and sell it today you would earn a total of 910.00 from holding Fairfax Fin Hld or generate 56.84% 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. International Petroleum Corp
Performance |
| Timeline |
| Fairfax Fin Hld |
| International Petroleum |
Fairfax Fin and International Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Fin and International Petroleum
The main advantage of trading using opposite Fairfax Fin and International Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Fin position performs unexpectedly, International Petroleum 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 International Petroleum will offset losses from the drop in International Petroleum's long position.| Fairfax Fin vs. Hemisphere Energy | Fairfax Fin vs. Cogeco Communications | Fairfax Fin vs. Computer Modelling Group | Fairfax Fin vs. Canso Credit Trust |
| International Petroleum vs. Canadian Natural Resources | International Petroleum vs. Suncor Energy | International Petroleum vs. iShares Canadian HYBrid | International Petroleum vs. Altagas Cum Red |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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