Correlation Between Fairfax Financial and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Algonquin Power 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 Financial and Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fairfax Financial Holdings and Algonquin Power Utilities, you can compare the effects of market volatilities on Fairfax Financial and Algonquin Power 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 Financial with a short position of Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Algonquin Power.
Diversification Opportunities for Fairfax Financial and Algonquin Power
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fairfax and Algonquin is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Algonquin Power Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algonquin Power Utilities and Fairfax Financial 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 Financial Holdings are associated (or correlated) with Algonquin Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algonquin Power Utilities has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Algonquin Power go up and down completely randomly.
Pair Corralation between Fairfax Financial and Algonquin Power
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 1.01 times more return on investment than Algonquin Power. However, Fairfax Financial is 1.01 times more volatile than Algonquin Power Utilities. It trades about 0.41 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about 0.07 per unit of risk. If you would invest 2,245 in Fairfax Financial Holdings on August 31, 2024 and sell it today you would earn a total of 275.00 from holding Fairfax Financial Holdings or generate 12.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Algonquin Power Utilities
Performance |
| Timeline |
| Fairfax Financial |
| Algonquin Power Utilities |
Fairfax Financial and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Algonquin Power
The main advantage of trading using opposite Fairfax Financial and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Algonquin Power 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 Algonquin Power will offset losses from the drop in Algonquin Power's long position.| Fairfax Financial vs. Fairfax Financial Holdings | Fairfax Financial vs. Fairfax Financial Holdings | Fairfax Financial vs. iShares Canadian HYBrid | Fairfax Financial vs. Brompton European Dividend |
| Algonquin Power vs. Fortis Inc | Algonquin Power vs. Enbridge | Algonquin Power vs. Telus Corp | Algonquin Power vs. Brookfield Renewable Partners |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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