Correlation Between Fairfax Financial and Goodfellow
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Goodfellow 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 Goodfellow 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 Goodfellow, you can compare the effects of market volatilities on Fairfax Financial and Goodfellow 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 Goodfellow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Goodfellow.
Diversification Opportunities for Fairfax Financial and Goodfellow
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fairfax and Goodfellow is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Goodfellow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodfellow 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 Goodfellow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodfellow has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Goodfellow go up and down completely randomly.
Pair Corralation between Fairfax Financial and Goodfellow
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.37 times more return on investment than Goodfellow. However, Fairfax Financial Holdings is 2.72 times less risky than Goodfellow. It trades about -0.01 of its potential returns per unit of risk. Goodfellow is currently generating about -0.12 per unit of risk. If you would invest 2,240 in Fairfax Financial Holdings on October 19, 2024 and sell it today you would lose (3.00) from holding Fairfax Financial Holdings or give up 0.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Goodfellow
Performance |
| Timeline |
| Fairfax Financial |
| Goodfellow |
Fairfax Financial and Goodfellow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Goodfellow
The main advantage of trading using opposite Fairfax Financial and Goodfellow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Goodfellow 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 Goodfellow will offset losses from the drop in Goodfellow's long position.| Fairfax Financial vs. CI Financial Corp | Fairfax Financial vs. Tree Island Steel | Fairfax Financial vs. Laurentian Bank | Fairfax Financial vs. Bank of Nova |
| Goodfellow vs. Algoma Central | Goodfellow vs. Taiga Building Products | Goodfellow vs. Conifex Timber | Goodfellow vs. Acadian Timber Corp |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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