Correlation Between Fairfax Financial and Northland Power
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Northland Power 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 Northland Power 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 Northland Power, you can compare the effects of market volatilities on Fairfax Financial and Northland Power 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 Northland Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Northland Power.
Diversification Opportunities for Fairfax Financial and Northland Power
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Fairfax and Northland is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Northland Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northland Power 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 Northland Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northland Power has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Northland Power go up and down completely randomly.
Pair Corralation between Fairfax Financial and Northland Power
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.35 times more return on investment than Northland Power. However, Fairfax Financial Holdings is 2.88 times less risky than Northland Power. It trades about 0.19 of its potential returns per unit of risk. Northland Power is currently generating about -0.14 per unit of risk. If you would invest 2,215 in Fairfax Financial Holdings on November 3, 2024 and sell it today you would earn a total of 65.00 from holding Fairfax Financial Holdings or generate 2.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Northland Power
Performance |
| Timeline |
| Fairfax Financial |
| Northland Power |
Fairfax Financial and Northland Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Northland Power
The main advantage of trading using opposite Fairfax Financial and Northland Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Northland Power 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 Northland Power will offset losses from the drop in Northland Power's long position.| Fairfax Financial vs. NextSource Materials | Fairfax Financial vs. Advent Wireless | Fairfax Financial vs. Brookfield Office Properties | Fairfax Financial vs. Converge Technology Solutions |
| Northland Power vs. Brookfield Renewable Partners | Northland Power vs. Algonquin Power Utilities | Northland Power vs. Innergex Renewable Energy | Northland Power vs. Capital Power |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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