Correlation Between Fairfax Financial and Canadian Life
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Canadian Life 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 Canadian Life 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 Canadian Life Companies, you can compare the effects of market volatilities on Fairfax Financial and Canadian Life 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 Canadian Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Canadian Life.
Diversification Opportunities for Fairfax Financial and Canadian Life
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fairfax and Canadian is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Canadian Life Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Life Companies 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 Canadian Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Life Companies has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Canadian Life go up and down completely randomly.
Pair Corralation between Fairfax Financial and Canadian Life
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 2.49 times more return on investment than Canadian Life. However, Fairfax Financial is 2.49 times more volatile than Canadian Life Companies. It trades about 0.1 of its potential returns per unit of risk. Canadian Life Companies is currently generating about 0.1 per unit of risk. If you would invest 1,558 in Fairfax Financial Holdings on November 1, 2024 and sell it today you would earn a total of 822.00 from holding Fairfax Financial Holdings or generate 52.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Canadian Life Companies
Performance |
| Timeline |
| Fairfax Financial |
| Canadian Life Companies |
Fairfax Financial and Canadian Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Canadian Life
The main advantage of trading using opposite Fairfax Financial and Canadian Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Canadian Life 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 Canadian Life will offset losses from the drop in Canadian Life's long position.| Fairfax Financial vs. Ramp Metals | Fairfax Financial vs. Mako Mining Corp | Fairfax Financial vs. Marimaca Copper Corp | Fairfax Financial vs. Metalero Mining Corp |
| Canadian Life vs. Constellation Software | Canadian Life vs. Northstar Clean Technologies | Canadian Life vs. HOME DEPOT CDR | Canadian Life vs. Global Crossing Airlines |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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