Correlation Between Fairfax Financial and Western Forest
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Western Forest 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 Western Forest 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 Western Forest Products, you can compare the effects of market volatilities on Fairfax Financial and Western Forest 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 Western Forest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Western Forest.
Diversification Opportunities for Fairfax Financial and Western Forest
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fairfax and Western is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Western Forest Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Forest Products 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 Western Forest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Forest Products has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Western Forest go up and down completely randomly.
Pair Corralation between Fairfax Financial and Western Forest
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.7 times more return on investment than Western Forest. However, Fairfax Financial Holdings is 1.44 times less risky than Western Forest. It trades about 0.33 of its potential returns per unit of risk. Western Forest Products is currently generating about -0.09 per unit of risk. If you would invest 1,754 in Fairfax Financial Holdings on August 29, 2024 and sell it today you would earn a total of 410.00 from holding Fairfax Financial Holdings or generate 23.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Western Forest Products
Performance |
| Timeline |
| Fairfax Financial |
| Western Forest Products |
Fairfax Financial and Western Forest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Western Forest
The main advantage of trading using opposite Fairfax Financial and Western Forest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Western Forest 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 Western Forest will offset losses from the drop in Western Forest's long position.| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. Fairfax Financial Holdings | Fairfax Financial vs. Fairfax Fin Hld | Fairfax Financial vs. Intact Financial Corp |
| Western Forest vs. Interfor Corp | Western Forest vs. Canfor | Western Forest vs. West Fraser Timber | Western Forest 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
Other Complementary Tools
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences |