Correlation Between Fairfax Financial and Brookfield Asset
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Brookfield Asset 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 Brookfield Asset 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 Brookfield Asset Management, you can compare the effects of market volatilities on Fairfax Financial and Brookfield Asset 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 Brookfield Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Brookfield Asset.
Diversification Opportunities for Fairfax Financial and Brookfield Asset
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fairfax and Brookfield is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Brookfield Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Asset Man 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 Brookfield Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Asset Man has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Brookfield Asset go up and down completely randomly.
Pair Corralation between Fairfax Financial and Brookfield Asset
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 1.0 times more return on investment than Brookfield Asset. However, Fairfax Financial is 1.0 times more volatile than Brookfield Asset Management. It trades about 0.3 of its potential returns per unit of risk. Brookfield Asset Management is currently generating about 0.14 per unit of risk. If you would invest 2,224 in Fairfax Financial Holdings on September 14, 2024 and sell it today you would earn a total of 193.00 from holding Fairfax Financial Holdings or generate 8.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Brookfield Asset Management
Performance |
| Timeline |
| Fairfax Financial |
| Brookfield Asset Man |
Fairfax Financial and Brookfield Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Brookfield Asset
The main advantage of trading using opposite Fairfax Financial and Brookfield Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Brookfield Asset 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 Brookfield Asset will offset losses from the drop in Brookfield Asset's long position.| Fairfax Financial vs. Fairfax Financial Holdings | Fairfax Financial vs. Fairfax Financial Holdings | Fairfax Financial vs. Fairfax Financial Holdings | Fairfax Financial vs. Fairfax Financial Holdings |
| Brookfield Asset vs. Fairfax Financial Holdings | Brookfield Asset vs. Partners Value Investments | Brookfield Asset vs. Western Investment | Brookfield Asset vs. Olympia Financial Group |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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