Correlation Between Fairfax Financial and Manulife Financial
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Manulife Financial 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 Manulife Financial 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 Manulife Financial Corp, you can compare the effects of market volatilities on Fairfax Financial and Manulife Financial 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 Manulife Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Manulife Financial.
Diversification Opportunities for Fairfax Financial and Manulife Financial
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fairfax and Manulife is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Manulife Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Financial Corp 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 Manulife Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Financial Corp has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Manulife Financial go up and down completely randomly.
Pair Corralation between Fairfax Financial and Manulife Financial
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.9 times more return on investment than Manulife Financial. However, Fairfax Financial Holdings is 1.11 times less risky than Manulife Financial. It trades about 0.26 of its potential returns per unit of risk. Manulife Financial Corp is currently generating about 0.1 per unit of risk. If you would invest 2,254 in Fairfax Financial Holdings on October 12, 2024 and sell it today you would earn a total of 91.00 from holding Fairfax Financial Holdings or generate 4.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Manulife Financial Corp
Performance |
| Timeline |
| Fairfax Financial |
| Manulife Financial Corp |
Fairfax Financial and Manulife Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Manulife Financial
The main advantage of trading using opposite Fairfax Financial and Manulife Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Manulife Financial 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 Manulife Financial will offset losses from the drop in Manulife Financial's long position.| Fairfax Financial vs. Andlauer Healthcare Gr | Fairfax Financial vs. Leveljump Healthcare Corp | Fairfax Financial vs. Wilmington Capital Management | Fairfax Financial vs. Definity Financial Corp |
| Manulife Financial vs. Rogers Communications | Manulife Financial vs. Cogeco Communications | Manulife Financial vs. Hemisphere Energy | Manulife Financial vs. Upstart Investments |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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