Correlation Between Fairfax Financial and Firm Capital
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Firm Capital 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 Firm Capital 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 Firm Capital Mortgage, you can compare the effects of market volatilities on Fairfax Financial and Firm Capital 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 Firm Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Firm Capital.
Diversification Opportunities for Fairfax Financial and Firm Capital
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fairfax and Firm is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Firm Capital Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firm Capital Mortgage 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 Firm Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firm Capital Mortgage has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Firm Capital go up and down completely randomly.
Pair Corralation between Fairfax Financial and Firm Capital
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 3.51 times more return on investment than Firm Capital. However, Fairfax Financial is 3.51 times more volatile than Firm Capital Mortgage. It trades about 0.29 of its potential returns per unit of risk. Firm Capital Mortgage is currently generating about 0.34 per unit of risk. If you would invest 1,855 in Fairfax Financial Holdings on September 1, 2024 and sell it today you would earn a total of 291.00 from holding Fairfax Financial Holdings or generate 15.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Firm Capital Mortgage
Performance |
| Timeline |
| Fairfax Financial |
| Firm Capital Mortgage |
Fairfax Financial and Firm Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Firm Capital
The main advantage of trading using opposite Fairfax Financial and Firm Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Firm Capital 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 Firm Capital will offset losses from the drop in Firm Capital's long position.| Fairfax Financial vs. Bird Construction | Fairfax Financial vs. Converge Technology Solutions | Fairfax Financial vs. Canaf Investments | Fairfax Financial vs. HPQ Silicon Resources |
| Firm Capital vs. Atrium Mortgage Investment | Firm Capital vs. MCAN Mortgage | Firm Capital vs. Timbercreek Financial Corp | Firm Capital vs. First National Financial |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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