Correlation Between Fairfax Financial and Brookfield Investments
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Brookfield Investments 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 Investments 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 Investments, you can compare the effects of market volatilities on Fairfax Financial and Brookfield Investments 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 Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Brookfield Investments.
Diversification Opportunities for Fairfax Financial and Brookfield Investments
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fairfax and Brookfield is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Brookfield Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Investments 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 Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Investments has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Brookfield Investments go up and down completely randomly.
Pair Corralation between Fairfax Financial and Brookfield Investments
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 2.41 times more return on investment than Brookfield Investments. However, Fairfax Financial is 2.41 times more volatile than Brookfield Investments. It trades about 0.06 of its potential returns per unit of risk. Brookfield Investments is currently generating about 0.01 per unit of risk. If you would invest 1,874 in Fairfax Financial Holdings on October 30, 2024 and sell it today you would earn a total of 561.00 from holding Fairfax Financial Holdings or generate 29.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 52.73% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Brookfield Investments
Performance |
| Timeline |
| Fairfax Financial |
| Brookfield Investments |
Fairfax Financial and Brookfield Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Brookfield Investments
The main advantage of trading using opposite Fairfax Financial and Brookfield Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Brookfield Investments 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 Investments will offset losses from the drop in Brookfield Investments' long position.| Fairfax Financial vs. Nicola Mining | Fairfax Financial vs. Sun Peak Metals | Fairfax Financial vs. XXIX Metal Corp | Fairfax Financial vs. Costco Wholesale Corp |
| Brookfield Investments vs. T2 Metals Corp | Brookfield Investments vs. Storage Vault Canada | Brookfield Investments vs. Magna Mining | Brookfield Investments vs. TUT Fitness 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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