Correlation Between Fairfax Financial and Stantec
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Stantec 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 Stantec 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 Stantec, you can compare the effects of market volatilities on Fairfax Financial and Stantec 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 Stantec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Stantec.
Diversification Opportunities for Fairfax Financial and Stantec
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Fairfax and Stantec is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Stantec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stantec 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 Stantec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stantec has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Stantec go up and down completely randomly.
Pair Corralation between Fairfax Financial and Stantec
Assuming the 90 days trading horizon Fairfax Financial is expected to generate 1.17 times less return on investment than Stantec. But when comparing it to its historical volatility, Fairfax Financial Holdings is 1.36 times less risky than Stantec. It trades about 0.1 of its potential returns per unit of risk. Stantec is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 6,742 in Stantec on October 14, 2024 and sell it today you would earn a total of 4,255 from holding Stantec or generate 63.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Stantec
Performance |
| Timeline |
| Fairfax Financial |
| Stantec |
Fairfax Financial and Stantec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Stantec
The main advantage of trading using opposite Fairfax Financial and Stantec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Stantec 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 Stantec will offset losses from the drop in Stantec's long position.| Fairfax Financial vs. Monument Mining Limited | Fairfax Financial vs. Lion One Metals | Fairfax Financial vs. Precious Metals And | Fairfax Financial vs. Sun Peak Metals |
| Stantec vs. Toromont Industries | Stantec vs. WSP Global | Stantec vs. Ritchie Bros Auctioneers | Stantec vs. Stella Jones |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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