Correlation Between Fairfax Financial and Caribbean Utilities
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Caribbean Utilities 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 Caribbean Utilities 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 Caribbean Utilities, you can compare the effects of market volatilities on Fairfax Financial and Caribbean Utilities 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 Caribbean Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Caribbean Utilities.
Diversification Opportunities for Fairfax Financial and Caribbean Utilities
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fairfax and Caribbean is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Caribbean Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caribbean Utilities 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 Caribbean Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caribbean Utilities has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Caribbean Utilities go up and down completely randomly.
Pair Corralation between Fairfax Financial and Caribbean Utilities
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 2.26 times more return on investment than Caribbean Utilities. However, Fairfax Financial is 2.26 times more volatile than Caribbean Utilities. It trades about 0.26 of its potential returns per unit of risk. Caribbean Utilities is currently generating about -0.04 per unit of risk. If you would invest 1,851 in Fairfax Financial Holdings on August 24, 2024 and sell it today you would earn a total of 249.00 from holding Fairfax Financial Holdings or generate 13.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Caribbean Utilities
Performance |
| Timeline |
| Fairfax Financial |
| Caribbean Utilities |
Fairfax Financial and Caribbean Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Caribbean Utilities
The main advantage of trading using opposite Fairfax Financial and Caribbean Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Caribbean Utilities 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 Caribbean Utilities will offset losses from the drop in Caribbean Utilities' 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 |
| Caribbean Utilities vs. Fortis Inc | Caribbean Utilities vs. Algonquin Power Utilities | Caribbean Utilities vs. Capital Power | Caribbean Utilities vs. Forstrong Global Income |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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