Correlation Between Fairfax Fin and Pine Cliff

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Can any of the company-specific risk be diversified away by investing in both Fairfax Fin 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 Fin 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 Fin Hld and Pine Cliff Energy, you can compare the effects of market volatilities on Fairfax Fin 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 Fin with a short position of Pine Cliff. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Fin and Pine Cliff.

Diversification Opportunities for Fairfax Fin and Pine Cliff

-0.36
  Correlation Coefficient

Very good diversification

The 3 months correlation between Fairfax and Pine is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Fin Hld 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 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 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 Fin i.e., Fairfax Fin and Pine Cliff go up and down completely randomly.

Pair Corralation between Fairfax Fin and Pine Cliff

Assuming the 90 days trading horizon Fairfax Fin Hld is expected to generate 0.86 times more return on investment than Pine Cliff. However, Fairfax Fin Hld is 1.17 times less risky than Pine Cliff. It trades about 0.22 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  1,760  in Fairfax Fin Hld on August 30, 2024 and sell it today you would earn a total of  398.00  from holding Fairfax Fin Hld or generate 22.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Fairfax Fin Hld  vs.  Pine Cliff Energy

 Performance 
       Timeline  
Fairfax Fin Hld 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Fin Hld are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal technical indicators, Fairfax Fin sustained solid returns over the last few months and may actually be approaching a breakup point.
Pine Cliff Energy 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Pine Cliff Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Fairfax Fin and Pine Cliff Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fairfax Fin and Pine Cliff

The main advantage of trading using opposite Fairfax Fin and Pine Cliff positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Fin 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.
The idea behind Fairfax Fin Hld and Pine Cliff Energy 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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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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