Correlation Between Fairfax Financial and Intact Financial

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Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Intact 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 Intact 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 Intact Financial, you can compare the effects of market volatilities on Fairfax Financial and Intact 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 Intact Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Intact Financial.

Diversification Opportunities for Fairfax Financial and Intact Financial

FairfaxIntactDiversified AwayFairfaxIntactDiversified Away100%
-0.14
  Correlation Coefficient

Good diversification

The 3 months correlation between Fairfax and Intact is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Intact Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intact Financial 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 Intact Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intact Financial has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Intact Financial go up and down completely randomly.

Pair Corralation between Fairfax Financial and Intact Financial

Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to under-perform the Intact Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, Fairfax Financial Holdings is 3.48 times less risky than Intact Financial. The preferred stock trades about -0.03 of its potential returns per unit of risk. The Intact Financial is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  25,903  in Intact Financial on November 25, 2024 and sell it today you would earn a total of  1,841  from holding Intact Financial or generate 7.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Fairfax Financial Holdings  vs.  Intact Financial

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -50510
JavaScript chart by amCharts 3.21.15FFH-PK IFC
       Timeline  
Fairfax Financial 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, Fairfax Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2323.223.423.623.82424.224.424.624.8
Intact Financial 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Intact Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Intact Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb250255260265270275280285290295

Fairfax Financial and Intact Financial Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.66-1.99-1.33-0.660.01190.721.432.152.87 0.10.20.30.40.5
JavaScript chart by amCharts 3.21.15FFH-PK IFC
       Returns  

Pair Trading with Fairfax Financial and Intact Financial

The main advantage of trading using opposite Fairfax Financial and Intact Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Intact 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 Intact Financial will offset losses from the drop in Intact Financial's long position.
The idea behind Fairfax Financial Holdings and Intact Financial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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