Correlation Between Fairfax Financial and Magnum Goldcorp
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Magnum Goldcorp 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 Magnum Goldcorp 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 Magnum Goldcorp, you can compare the effects of market volatilities on Fairfax Financial and Magnum Goldcorp 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 Magnum Goldcorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Magnum Goldcorp.
Diversification Opportunities for Fairfax Financial and Magnum Goldcorp
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fairfax and Magnum is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Magnum Goldcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnum Goldcorp 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 Magnum Goldcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnum Goldcorp has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Magnum Goldcorp go up and down completely randomly.
Pair Corralation between Fairfax Financial and Magnum Goldcorp
Assuming the 90 days trading horizon Fairfax Financial is expected to generate 12.72 times less return on investment than Magnum Goldcorp. But when comparing it to its historical volatility, Fairfax Financial Holdings is 18.25 times less risky than Magnum Goldcorp. It trades about 0.09 of its potential returns per unit of risk. Magnum Goldcorp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 10.00 in Magnum Goldcorp on September 14, 2024 and sell it today you would lose (6.00) from holding Magnum Goldcorp or give up 60.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Magnum Goldcorp
Performance |
| Timeline |
| Fairfax Financial |
| Magnum Goldcorp |
Fairfax Financial and Magnum Goldcorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Magnum Goldcorp
The main advantage of trading using opposite Fairfax Financial and Magnum Goldcorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Magnum Goldcorp 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 Magnum Goldcorp will offset losses from the drop in Magnum Goldcorp'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 |
| Magnum Goldcorp vs. Arbor Metals Corp | Magnum Goldcorp vs. Ramp Metals | Magnum Goldcorp vs. Royal Bank of | Magnum Goldcorp vs. Fairfax Financial Holdings |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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