Correlation Between Fairfax Financial and Canopy Growth
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Canopy Growth 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 Canopy Growth 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 Canopy Growth Corp, you can compare the effects of market volatilities on Fairfax Financial and Canopy Growth 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 Canopy Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Canopy Growth.
Diversification Opportunities for Fairfax Financial and Canopy Growth
-0.86 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Fairfax and Canopy is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Canopy Growth Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canopy Growth 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 Canopy Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canopy Growth Corp has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Canopy Growth go up and down completely randomly.
Pair Corralation between Fairfax Financial and Canopy Growth
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.21 times more return on investment than Canopy Growth. However, Fairfax Financial Holdings is 4.71 times less risky than Canopy Growth. It trades about 0.46 of its potential returns per unit of risk. Canopy Growth Corp is currently generating about -0.38 per unit of risk. If you would invest 2,260 in Fairfax Financial Holdings on October 25, 2024 and sell it today you would earn a total of 135.00 from holding Fairfax Financial Holdings or generate 5.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Canopy Growth Corp
Performance |
| Timeline |
| Fairfax Financial |
| Canopy Growth Corp |
Fairfax Financial and Canopy Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Canopy Growth
The main advantage of trading using opposite Fairfax Financial and Canopy Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Canopy Growth 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 Canopy Growth will offset losses from the drop in Canopy Growth's long position.| Fairfax Financial vs. Constellation Software | Fairfax Financial vs. MTY Food Group | Fairfax Financial vs. Canlan Ice Sports | Fairfax Financial vs. Nano One Materials |
| Canopy Growth vs. Aurora Cannabis | Canopy Growth vs. Cronos Group | Canopy Growth vs. Air Canada | Canopy Growth vs. Shopify |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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