Correlation Between Fairfax Fin and Brookfield Asset
Can any of the company-specific risk be diversified away by investing in both Fairfax Fin and Brookfield Asset 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 Fin and Brookfield Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fairfax Fin Hld and Brookfield Asset Management, you can compare the effects of market volatilities on Fairfax Fin and Brookfield Asset 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 Fin with a short position of Brookfield Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Fin and Brookfield Asset.
Diversification Opportunities for Fairfax Fin and Brookfield Asset
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fairfax and Brookfield is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Fin Hld and Brookfield Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Asset Man and Fairfax Fin 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 Fin Hld are associated (or correlated) with Brookfield Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Asset Man has no effect on the direction of Fairfax Fin i.e., Fairfax Fin and Brookfield Asset go up and down completely randomly.
Pair Corralation between Fairfax Fin and Brookfield Asset
Assuming the 90 days trading horizon Fairfax Fin Hld is expected to under-perform the Brookfield Asset. But the preferred stock apears to be less risky and, when comparing its historical volatility, Fairfax Fin Hld is 1.23 times less risky than Brookfield Asset. The preferred stock trades about -0.31 of its potential returns per unit of risk. The Brookfield Asset Management is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 1,261 in Brookfield Asset Management on November 29, 2024 and sell it today you would lose (21.00) from holding Brookfield Asset Management or give up 1.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Fin Hld vs. Brookfield Asset Management
Performance |
| Timeline |
| Fairfax Fin Hld |
| Brookfield Asset Man |
Fairfax Fin and Brookfield Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Fin and Brookfield Asset
The main advantage of trading using opposite Fairfax Fin and Brookfield Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Fin position performs unexpectedly, Brookfield Asset 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 Brookfield Asset will offset losses from the drop in Brookfield Asset's long position.| Fairfax Fin vs. Ramp Metals | Fairfax Fin vs. Black Mammoth Metals | Fairfax Fin vs. NeXGold Mining Corp | Fairfax Fin vs. Westshore Terminals 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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