Correlation Between Fairfax Financial and BRP
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and BRP 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 BRP 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 BRP Inc, you can compare the effects of market volatilities on Fairfax Financial and BRP 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 BRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and BRP.
Diversification Opportunities for Fairfax Financial and BRP
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fairfax and BRP is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc 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 BRP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRP Inc has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and BRP go up and down completely randomly.
Pair Corralation between Fairfax Financial and BRP
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.48 times more return on investment than BRP. However, Fairfax Financial Holdings is 2.1 times less risky than BRP. It trades about 0.1 of its potential returns per unit of risk. BRP Inc is currently generating about -0.08 per unit of risk. If you would invest 1,883 in Fairfax Financial Holdings on November 28, 2024 and sell it today you would earn a total of 384.00 from holding Fairfax Financial Holdings or generate 20.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. BRP Inc
Performance |
| Timeline |
| Fairfax Financial |
| BRP Inc |
Fairfax Financial and BRP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and BRP
The main advantage of trading using opposite Fairfax Financial and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, BRP 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 BRP will offset losses from the drop in BRP's long position.| Fairfax Financial vs. Questor Technology | Fairfax Financial vs. Renoworks Software | Fairfax Financial vs. Solid Impact Investments | Fairfax Financial vs. Economic Investment Trust |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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