Correlation Between Fairfax Financial and Findev
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Findev 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 Findev 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 Findev Inc, you can compare the effects of market volatilities on Fairfax Financial and Findev 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 Findev. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Findev.
Diversification Opportunities for Fairfax Financial and Findev
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fairfax and Findev is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Findev Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Findev Inc 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 Findev. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Findev Inc has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Findev go up and down completely randomly.
Pair Corralation between Fairfax Financial and Findev
Assuming the 90 days trading horizon Fairfax Financial is expected to generate 1.23 times less return on investment than Findev. But when comparing it to its historical volatility, Fairfax Financial Holdings is 4.28 times less risky than Findev. It trades about 0.09 of its potential returns per unit of risk. Findev Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 40.00 in Findev Inc on August 26, 2024 and sell it today you would earn a total of 6.00 from holding Findev Inc or generate 15.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Findev Inc
Performance |
| Timeline |
| Fairfax Financial |
| Findev Inc |
Fairfax Financial and Findev Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Findev
The main advantage of trading using opposite Fairfax Financial and Findev positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Findev 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 Findev will offset losses from the drop in Findev's 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 |
| Findev vs. Senvest Capital | Findev vs. Fairfax Financial Holdings | Findev vs. Bank of Montreal | Findev vs. Bank of Montreal |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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