Correlation Between Fairfax Financial and Buhler Industries
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Buhler Industries 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 Buhler Industries 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 Buhler Industries, you can compare the effects of market volatilities on Fairfax Financial and Buhler Industries 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 Buhler Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Buhler Industries.
Diversification Opportunities for Fairfax Financial and Buhler Industries
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fairfax and Buhler is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Buhler Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buhler Industries 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 Buhler Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buhler Industries has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Buhler Industries go up and down completely randomly.
Pair Corralation between Fairfax Financial and Buhler Industries
Assuming the 90 days trading horizon Fairfax Financial is expected to generate 1.43 times less return on investment than Buhler Industries. But when comparing it to its historical volatility, Fairfax Financial Holdings is 1.96 times less risky than Buhler Industries. It trades about 0.26 of its potential returns per unit of risk. Buhler Industries is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 245.00 in Buhler Industries on August 24, 2024 and sell it today you would earn a total of 43.00 from holding Buhler Industries or generate 17.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Buhler Industries
Performance |
| Timeline |
| Fairfax Financial |
| Buhler Industries |
Fairfax Financial and Buhler Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Buhler Industries
The main advantage of trading using opposite Fairfax Financial and Buhler Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Buhler Industries 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 Buhler Industries will offset losses from the drop in Buhler Industries' 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 |
| Buhler Industries vs. Clarke Inc | Buhler Industries vs. Accord Financial Corp | Buhler Industries vs. ADF Group | Buhler Industries vs. Algoma Central |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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