Correlation Between Fairfax Financial and Burcon NutraScience
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Burcon NutraScience 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 Burcon NutraScience 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 Burcon NutraScience, you can compare the effects of market volatilities on Fairfax Financial and Burcon NutraScience 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 Burcon NutraScience. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Burcon NutraScience.
Diversification Opportunities for Fairfax Financial and Burcon NutraScience
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fairfax and Burcon is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Burcon NutraScience in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burcon NutraScience 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 Burcon NutraScience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burcon NutraScience has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Burcon NutraScience go up and down completely randomly.
Pair Corralation between Fairfax Financial and Burcon NutraScience
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.08 times more return on investment than Burcon NutraScience. However, Fairfax Financial Holdings is 11.8 times less risky than Burcon NutraScience. It trades about 0.3 of its potential returns per unit of risk. Burcon NutraScience is currently generating about -0.04 per unit of risk. If you would invest 2,345 in Fairfax Financial Holdings on September 12, 2024 and sell it today you would earn a total of 195.00 from holding Fairfax Financial Holdings or generate 8.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Burcon NutraScience
Performance |
| Timeline |
| Fairfax Financial |
| Burcon NutraScience |
Fairfax Financial and Burcon NutraScience Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Burcon NutraScience
The main advantage of trading using opposite Fairfax Financial and Burcon NutraScience positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Burcon NutraScience 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 Burcon NutraScience will offset losses from the drop in Burcon NutraScience's long position.| Fairfax Financial vs. Fairfax Financial Holdings | Fairfax Financial vs. Fairfax Fin Hld | Fairfax Financial vs. Fairfax Financial Holdings | Fairfax Financial vs. Fairfax Financial Holdings |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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