Correlation Between Fairfax Fin and Toromont Industries
Can any of the company-specific risk be diversified away by investing in both Fairfax Fin and Toromont Industries 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 Toromont Industries 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 Toromont Industries, you can compare the effects of market volatilities on Fairfax Fin and Toromont Industries 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 Toromont Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Fin and Toromont Industries.
Diversification Opportunities for Fairfax Fin and Toromont Industries
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fairfax and Toromont is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Fin Hld and Toromont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toromont Industries 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 Toromont Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toromont Industries has no effect on the direction of Fairfax Fin i.e., Fairfax Fin and Toromont Industries go up and down completely randomly.
Pair Corralation between Fairfax Fin and Toromont Industries
Assuming the 90 days trading horizon Fairfax Fin Hld is expected to generate 1.36 times more return on investment than Toromont Industries. However, Fairfax Fin is 1.36 times more volatile than Toromont Industries. It trades about 0.37 of its potential returns per unit of risk. Toromont Industries is currently generating about -0.42 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Fin Hld vs. Toromont Industries
Performance |
| Timeline |
| Fairfax Fin Hld |
| Toromont Industries |
Fairfax Fin and Toromont Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Fin and Toromont Industries
The main advantage of trading using opposite Fairfax Fin and Toromont Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Fin position performs unexpectedly, Toromont Industries 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 Toromont Industries will offset losses from the drop in Toromont Industries' long position.| Fairfax Fin vs. Intact Financial | Fairfax Fin vs. Fairfax Financial Holdings | Fairfax Fin vs. Intact Financial Corp |
| Toromont Industries vs. Finning International | Toromont Industries vs. Stantec | Toromont Industries vs. Ritchie Bros Auctioneers | Toromont Industries vs. CCL Industries |
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 CEOs Directory module to screen CEOs from public companies around the world.
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