Correlation Between Fairfax Financial and Diamond Estates
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Diamond Estates 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 Diamond Estates 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 Diamond Estates Wines, you can compare the effects of market volatilities on Fairfax Financial and Diamond Estates 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 Diamond Estates. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Diamond Estates.
Diversification Opportunities for Fairfax Financial and Diamond Estates
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fairfax and Diamond is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Diamond Estates Wines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Estates Wines 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 Diamond Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Estates Wines has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Diamond Estates go up and down completely randomly.
Pair Corralation between Fairfax Financial and Diamond Estates
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.5 times more return on investment than Diamond Estates. However, Fairfax Financial Holdings is 1.99 times less risky than Diamond Estates. It trades about 0.31 of its potential returns per unit of risk. Diamond Estates Wines is currently generating about -0.24 per unit of risk. If you would invest 1,930 in Fairfax Financial Holdings on August 28, 2024 and sell it today you would earn a total of 315.00 from holding Fairfax Financial Holdings or generate 16.32% 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. Diamond Estates Wines
Performance |
| Timeline |
| Fairfax Financial |
| Diamond Estates Wines |
Fairfax Financial and Diamond Estates Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Diamond Estates
The main advantage of trading using opposite Fairfax Financial and Diamond Estates positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Diamond Estates 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 Diamond Estates will offset losses from the drop in Diamond Estates' 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 |
| Diamond Estates vs. Information Services | Diamond Estates vs. Osisko Metals | Diamond Estates vs. Firan Technology Group | Diamond Estates vs. Northstar Clean Technologies |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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