Correlation Between Fairfax Financial and Toromont Industries
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial 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 Financial 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 Financial Holdings and Toromont Industries, you can compare the effects of market volatilities on Fairfax Financial 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 Financial with a short position of Toromont Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Toromont Industries.
Diversification Opportunities for Fairfax Financial and Toromont Industries
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Fairfax and Toromont is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Toromont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toromont Industries 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 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 Financial i.e., Fairfax Financial and Toromont Industries go up and down completely randomly.
Pair Corralation between Fairfax Financial and Toromont Industries
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.78 times more return on investment than Toromont Industries. However, Fairfax Financial Holdings is 1.28 times less risky than Toromont Industries. It trades about 0.11 of its potential returns per unit of risk. Toromont Industries is currently generating about 0.03 per unit of risk. If you would invest 1,584 in Fairfax Financial Holdings on September 3, 2024 and sell it today you would earn a total of 955.00 from holding Fairfax Financial Holdings or generate 60.29% 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. Toromont Industries
Performance |
| Timeline |
| Fairfax Financial |
| Toromont Industries |
Fairfax Financial and Toromont Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Toromont Industries
The main advantage of trading using opposite Fairfax Financial and Toromont Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial 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 Financial vs. Plaza Retail REIT | Fairfax Financial vs. Talon Metals Corp | Fairfax Financial vs. Everyday People Financial | Fairfax Financial vs. Lion One Metals |
| 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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