Correlation Between Fairfax Financial and InPlay Oil
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and InPlay Oil 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 InPlay Oil 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 InPlay Oil Corp, you can compare the effects of market volatilities on Fairfax Financial and InPlay Oil 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 InPlay Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and InPlay Oil.
Diversification Opportunities for Fairfax Financial and InPlay Oil
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fairfax and InPlay is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and InPlay Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InPlay Oil Corp 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 InPlay Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InPlay Oil Corp has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and InPlay Oil go up and down completely randomly.
Pair Corralation between Fairfax Financial and InPlay Oil
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 1.46 times more return on investment than InPlay Oil. However, Fairfax Financial is 1.46 times more volatile than InPlay Oil Corp. It trades about 0.3 of its potential returns per unit of risk. InPlay Oil Corp is currently generating about -0.11 per unit of risk. If you would invest 1,800 in Fairfax Financial Holdings on August 27, 2024 and sell it today you would earn a total of 380.00 from holding Fairfax Financial Holdings or generate 21.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. InPlay Oil Corp
Performance |
| Timeline |
| Fairfax Financial |
| InPlay Oil Corp |
Fairfax Financial and InPlay Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and InPlay Oil
The main advantage of trading using opposite Fairfax Financial and InPlay Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, InPlay Oil 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 InPlay Oil will offset losses from the drop in InPlay Oil's long position.| Fairfax Financial vs. Forstrong Global Income | Fairfax Financial vs. BMO Aggregate Bond | Fairfax Financial vs. Terreno Resources Corp | Fairfax Financial vs. iShares Canadian HYBrid |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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