Correlation Between Fairfax Financial and Forstrong Global
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Forstrong Global 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 Forstrong Global 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 Forstrong Global Income, you can compare the effects of market volatilities on Fairfax Financial and Forstrong Global 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 Forstrong Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Forstrong Global.
Diversification Opportunities for Fairfax Financial and Forstrong Global
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Fairfax and Forstrong is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Forstrong Global Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forstrong Global 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 Forstrong Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forstrong Global Income has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Forstrong Global go up and down completely randomly.
Pair Corralation between Fairfax Financial and Forstrong Global
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 8.36 times more return on investment than Forstrong Global. However, Fairfax Financial is 8.36 times more volatile than Forstrong Global Income. It trades about 0.26 of its potential returns per unit of risk. Forstrong Global Income is currently generating about -0.08 per unit of risk. If you would invest 1,894 in Fairfax Financial Holdings on August 31, 2024 and sell it today you would earn a total of 346.00 from holding Fairfax Financial Holdings or generate 18.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Forstrong Global Income
Performance |
| Timeline |
| Fairfax Financial |
| Forstrong Global Income |
Fairfax Financial and Forstrong Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Forstrong Global
The main advantage of trading using opposite Fairfax Financial and Forstrong Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Forstrong Global 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 Forstrong Global will offset losses from the drop in Forstrong Global's long position.| Fairfax Financial vs. Northstar Clean Technologies | Fairfax Financial vs. Upstart Investments | Fairfax Financial vs. Dream Office Real | Fairfax Financial vs. CNJ Capital Investments |
| Forstrong Global vs. Forstrong Global Ex North | Forstrong Global vs. Forstrong Global Growth | Forstrong Global vs. Forstrong Emerging Markets | Forstrong Global vs. NBI High Yield |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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