Correlation Between Fairfax Financial and Boralex
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Boralex 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 Boralex 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 Boralex, you can compare the effects of market volatilities on Fairfax Financial and Boralex 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 Boralex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Boralex.
Diversification Opportunities for Fairfax Financial and Boralex
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fairfax and Boralex is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Boralex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boralex 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 Boralex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boralex has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Boralex go up and down completely randomly.
Pair Corralation between Fairfax Financial and Boralex
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.88 times more return on investment than Boralex. However, Fairfax Financial Holdings is 1.14 times less risky than Boralex. It trades about 0.12 of its potential returns per unit of risk. Boralex is currently generating about 0.02 per unit of risk. If you would invest 1,684 in Fairfax Financial Holdings on September 3, 2024 and sell it today you would earn a total of 496.00 from holding Fairfax Financial Holdings or generate 29.45% 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. Boralex
Performance |
| Timeline |
| Fairfax Financial |
| Boralex |
Fairfax Financial and Boralex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Boralex
The main advantage of trading using opposite Fairfax Financial and Boralex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Boralex 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 Boralex will offset losses from the drop in Boralex's long position.| Fairfax Financial vs. AGF Management Limited | Fairfax Financial vs. SalesforceCom CDR | Fairfax Financial vs. Storage Vault Canada | Fairfax Financial vs. Wishpond Technologies |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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