Correlation Between Fairfax Financial and Enbridge Pref
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By analyzing existing cross correlation between Fairfax Financial Holdings and Enbridge Pref 15, you can compare the effects of market volatilities on Fairfax Financial and Enbridge Pref 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 Enbridge Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Enbridge Pref.
Diversification Opportunities for Fairfax Financial and Enbridge Pref
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fairfax and Enbridge is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Enbridge Pref 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Pref 15 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 Enbridge Pref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge Pref 15 has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Enbridge Pref go up and down completely randomly.
Pair Corralation between Fairfax Financial and Enbridge Pref
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 2.06 times more return on investment than Enbridge Pref. However, Fairfax Financial is 2.06 times more volatile than Enbridge Pref 15. It trades about 0.22 of its potential returns per unit of risk. Enbridge Pref 15 is currently generating about 0.37 per unit of risk. If you would invest 2,130 in Fairfax Financial Holdings on September 23, 2024 and sell it today you would earn a total of 128.00 from holding Fairfax Financial Holdings or generate 6.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Enbridge Pref 15
Performance |
| Timeline |
| Fairfax Financial |
| Enbridge Pref 15 |
Fairfax Financial and Enbridge Pref Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Enbridge Pref
The main advantage of trading using opposite Fairfax Financial and Enbridge Pref positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Enbridge Pref 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 Enbridge Pref will offset losses from the drop in Enbridge Pref's long position.The idea behind Fairfax Financial Holdings and Enbridge Pref 15 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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