Correlation Between Fairfax Financial and BMO Aggregate
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and BMO Aggregate 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 BMO Aggregate 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 BMO Aggregate Bond, you can compare the effects of market volatilities on Fairfax Financial and BMO Aggregate 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 BMO Aggregate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and BMO Aggregate.
Diversification Opportunities for Fairfax Financial and BMO Aggregate
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fairfax and BMO is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and BMO Aggregate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Aggregate Bond 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 BMO Aggregate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Aggregate Bond has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and BMO Aggregate go up and down completely randomly.
Pair Corralation between Fairfax Financial and BMO Aggregate
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 12.22 times more return on investment than BMO Aggregate. However, Fairfax Financial is 12.22 times more volatile than BMO Aggregate Bond. It trades about 0.26 of its potential returns per unit of risk. BMO Aggregate Bond is currently generating about 0.13 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 Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. BMO Aggregate Bond
Performance |
| Timeline |
| Fairfax Financial |
| BMO Aggregate Bond |
Fairfax Financial and BMO Aggregate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and BMO Aggregate
The main advantage of trading using opposite Fairfax Financial and BMO Aggregate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, BMO Aggregate 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 BMO Aggregate will offset losses from the drop in BMO Aggregate'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 |
| BMO Aggregate vs. BMO Short Term Bond | BMO Aggregate vs. BMO Canadian Bank | BMO Aggregate vs. BMO Aggregate Bond | BMO Aggregate vs. BMO Balanced ETF |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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