Correlation Between Fairfax Financial and American Hotel
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and American Hotel 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 American Hotel 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 American Hotel Income, you can compare the effects of market volatilities on Fairfax Financial and American Hotel 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 American Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and American Hotel.
Diversification Opportunities for Fairfax Financial and American Hotel
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fairfax and American is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and American Hotel Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Hotel Income 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 American Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Hotel Income has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and American Hotel go up and down completely randomly.
Pair Corralation between Fairfax Financial and American Hotel
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.23 times more return on investment than American Hotel. However, Fairfax Financial Holdings is 4.35 times less risky than American Hotel. It trades about 0.13 of its potential returns per unit of risk. American Hotel Income is currently generating about 0.0 per unit of risk. If you would invest 1,570 in Fairfax Financial Holdings on September 4, 2024 and sell it today you would earn a total of 601.00 from holding Fairfax Financial Holdings or generate 38.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. American Hotel Income
Performance |
| Timeline |
| Fairfax Financial |
| American Hotel Income |
Fairfax Financial and American Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and American Hotel
The main advantage of trading using opposite Fairfax Financial and American Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, American Hotel 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 American Hotel will offset losses from the drop in American Hotel's long position.| Fairfax Financial vs. Plaza Retail REIT | Fairfax Financial vs. Labrador Iron Ore | Fairfax Financial vs. SalesforceCom CDR | Fairfax Financial vs. Canadian Utilities Limited |
| American Hotel vs. Slate Office REIT | American Hotel vs. BTB Real Estate | American Hotel vs. Inovalis Real Estate | American Hotel vs. True North Commercial |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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