Correlation Between Fairfax Financial and Black Diamond
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Black Diamond 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 Black Diamond 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 Black Diamond Group, you can compare the effects of market volatilities on Fairfax Financial and Black Diamond 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 Black Diamond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Black Diamond.
Diversification Opportunities for Fairfax Financial and Black Diamond
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fairfax and Black is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Black Diamond Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Diamond Group 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 Black Diamond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Diamond Group has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Black Diamond go up and down completely randomly.
Pair Corralation between Fairfax Financial and Black Diamond
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.58 times more return on investment than Black Diamond. However, Fairfax Financial Holdings is 1.73 times less risky than Black Diamond. It trades about 0.17 of its potential returns per unit of risk. Black Diamond Group is currently generating about -0.11 per unit of risk. If you would invest 2,190 in Fairfax Financial Holdings on September 2, 2024 and sell it today you would earn a total of 210.00 from holding Fairfax Financial Holdings or generate 9.59% 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. Black Diamond Group
Performance |
| Timeline |
| Fairfax Financial |
| Black Diamond Group |
Fairfax Financial and Black Diamond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Black Diamond
The main advantage of trading using opposite Fairfax Financial and Black Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Black Diamond 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 Black Diamond will offset losses from the drop in Black Diamond's long position.| Fairfax Financial vs. Endeavour Silver Corp | Fairfax Financial vs. Monument Mining Limited | Fairfax Financial vs. TGS Esports | Fairfax Financial vs. Perseus Mining |
| Black Diamond vs. CES Energy Solutions | Black Diamond vs. Calfrac Well Services | Black Diamond vs. Secure Energy Services | Black Diamond vs. Bird Construction |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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