Correlation Between Fairfax Financial and Pine Cliff
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Pine Cliff 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 Pine Cliff 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 Pine Cliff Energy, you can compare the effects of market volatilities on Fairfax Financial and Pine Cliff 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 Pine Cliff. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Pine Cliff.
Diversification Opportunities for Fairfax Financial and Pine Cliff
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fairfax and Pine is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Pine Cliff Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pine Cliff Energy 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 Pine Cliff. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pine Cliff Energy has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Pine Cliff go up and down completely randomly.
Pair Corralation between Fairfax Financial and Pine Cliff
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.87 times more return on investment than Pine Cliff. However, Fairfax Financial Holdings is 1.14 times less risky than Pine Cliff. It trades about 0.27 of its potential returns per unit of risk. Pine Cliff Energy is currently generating about -0.1 per unit of risk. If you would invest 1,715 in Fairfax Financial Holdings on August 30, 2024 and sell it today you would earn a total of 505.00 from holding Fairfax Financial Holdings or generate 29.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Pine Cliff Energy
Performance |
| Timeline |
| Fairfax Financial |
| Pine Cliff Energy |
Fairfax Financial and Pine Cliff Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Pine Cliff
The main advantage of trading using opposite Fairfax Financial and Pine Cliff positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Pine Cliff 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 Pine Cliff will offset losses from the drop in Pine Cliff's long position.| Fairfax Financial vs. Champion Gaming Group | Fairfax Financial vs. First National Financial | Fairfax Financial vs. Perseus Mining | Fairfax Financial vs. Pollard Banknote Limited |
| Pine Cliff vs. Gear Energy | Pine Cliff vs. Headwater Exploration | Pine Cliff vs. Cardinal Energy | Pine Cliff vs. Journey Energy |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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