Correlation Between Fairfax Fin and Linamar
Can any of the company-specific risk be diversified away by investing in both Fairfax Fin and Linamar 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 Linamar 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 Linamar, you can compare the effects of market volatilities on Fairfax Fin and Linamar 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 Linamar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Fin and Linamar.
Diversification Opportunities for Fairfax Fin and Linamar
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fairfax and Linamar is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Fin Hld and Linamar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linamar 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 Linamar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linamar has no effect on the direction of Fairfax Fin i.e., Fairfax Fin and Linamar go up and down completely randomly.
Pair Corralation between Fairfax Fin and Linamar
Assuming the 90 days trading horizon Fairfax Fin Hld is expected to generate 0.74 times more return on investment than Linamar. However, Fairfax Fin Hld is 1.35 times less risky than Linamar. It trades about 0.37 of its potential returns per unit of risk. Linamar is currently generating about 0.03 per unit of risk. If you would invest 2,265 in Fairfax Fin Hld on August 28, 2024 and sell it today you would earn a total of 248.00 from holding Fairfax Fin Hld or generate 10.95% 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. Linamar
Performance |
| Timeline |
| Fairfax Fin Hld |
| Linamar |
Fairfax Fin and Linamar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Fin and Linamar
The main advantage of trading using opposite Fairfax Fin and Linamar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Fin position performs unexpectedly, Linamar 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 Linamar will offset losses from the drop in Linamar's long position.| Fairfax Fin vs. Intact Financial | Fairfax Fin vs. Fairfax Financial Holdings | Fairfax Fin vs. Intact Financial Corp |
| Linamar vs. Martinrea International | Linamar vs. Magna International | Linamar vs. CCL Industries | Linamar vs. Stella Jones |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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