Correlation Between Fairfax Financial and Richards Packaging
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Richards Packaging 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 Richards Packaging 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 Richards Packaging Income, you can compare the effects of market volatilities on Fairfax Financial and Richards Packaging 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 Richards Packaging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Richards Packaging.
Diversification Opportunities for Fairfax Financial and Richards Packaging
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fairfax and Richards is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Richards Packaging Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richards Packaging 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 Richards Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richards Packaging Income has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Richards Packaging go up and down completely randomly.
Pair Corralation between Fairfax Financial and Richards Packaging
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 4.27 times more return on investment than Richards Packaging. However, Fairfax Financial is 4.27 times more volatile than Richards Packaging Income. It trades about 0.27 of its potential returns per unit of risk. Richards Packaging Income is currently generating about -0.66 per unit of risk. If you would invest 1,855 in Fairfax Financial Holdings on August 25, 2024 and sell it today you would earn a total of 254.00 from holding Fairfax Financial Holdings or generate 13.69% 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. Richards Packaging Income
Performance |
| Timeline |
| Fairfax Financial |
| Richards Packaging Income |
Fairfax Financial and Richards Packaging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Richards Packaging
The main advantage of trading using opposite Fairfax Financial and Richards Packaging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Richards Packaging 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 Richards Packaging will offset losses from the drop in Richards Packaging'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 |
| Richards Packaging vs. K Bro Linen | Richards Packaging vs. The Keg Royalties | Richards Packaging vs. Pollard Banknote Limited | Richards Packaging vs. SIR Royalty Income |
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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