Correlation Between Fairfax Financial and BCE
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and BCE 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 BCE 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 BCE Inc Pref, you can compare the effects of market volatilities on Fairfax Financial and BCE 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 BCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and BCE.
Diversification Opportunities for Fairfax Financial and BCE
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fairfax and BCE is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and BCE Inc Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc Pref 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 BCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCE Inc Pref has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and BCE go up and down completely randomly.
Pair Corralation between Fairfax Financial and BCE
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 1.07 times more return on investment than BCE. However, Fairfax Financial is 1.07 times more volatile than BCE Inc Pref. It trades about 0.1 of its potential returns per unit of risk. BCE Inc Pref is currently generating about 0.03 per unit of risk. If you would invest 1,380 in Fairfax Financial Holdings on September 13, 2024 and sell it today you would earn a total of 820.00 from holding Fairfax Financial Holdings or generate 59.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. BCE Inc Pref
Performance |
| Timeline |
| Fairfax Financial |
| BCE Inc Pref |
Fairfax Financial and BCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and BCE
The main advantage of trading using opposite Fairfax Financial and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, BCE 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 BCE will offset losses from the drop in BCE's long position.| Fairfax Financial vs. Talon Metals Corp | Fairfax Financial vs. Arbor Metals Corp | Fairfax Financial vs. Nicola Mining | Fairfax Financial vs. Data Communications Management |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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