Correlation Between Fairfax Financial and National Bank
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and National Bank 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 National Bank 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 National Bank of, you can compare the effects of market volatilities on Fairfax Financial and National Bank 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 National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and National Bank.
Diversification Opportunities for Fairfax Financial and National Bank
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fairfax and National is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and National Bank go up and down completely randomly.
Pair Corralation between Fairfax Financial and National Bank
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 4.3 times more return on investment than National Bank. However, Fairfax Financial is 4.3 times more volatile than National Bank of. It trades about 0.34 of its potential returns per unit of risk. National Bank of is currently generating about 0.28 per unit of risk. If you would invest 1,851 in Fairfax Financial Holdings on August 28, 2024 and sell it today you would earn a total of 339.00 from holding Fairfax Financial Holdings or generate 18.31% 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. National Bank of
Performance |
| Timeline |
| Fairfax Financial |
| National Bank |
Fairfax Financial and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and National Bank
The main advantage of trading using opposite Fairfax Financial and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, National Bank 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 National Bank will offset losses from the drop in National Bank'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 |
| National Bank vs. DelphX Capital Markets | National Bank vs. Citadel Income | National Bank vs. iShares Canadian HYBrid | National Bank vs. Altagas Cum Red |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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