Correlation Between Fairfax Financial and Nickel Creek
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Nickel Creek 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 Nickel Creek 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 Nickel Creek Platinum, you can compare the effects of market volatilities on Fairfax Financial and Nickel Creek 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 Nickel Creek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Nickel Creek.
Diversification Opportunities for Fairfax Financial and Nickel Creek
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fairfax and Nickel is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Nickel Creek Platinum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nickel Creek Platinum 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 Nickel Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nickel Creek Platinum has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Nickel Creek go up and down completely randomly.
Pair Corralation between Fairfax Financial and Nickel Creek
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.64 times more return on investment than Nickel Creek. However, Fairfax Financial Holdings is 1.56 times less risky than Nickel Creek. It trades about 0.27 of its potential returns per unit of risk. Nickel Creek Platinum is currently generating about 0.07 per unit of risk. If you would invest 2,229 in Fairfax Financial Holdings on August 27, 2024 and sell it today you would earn a total of 156.00 from holding Fairfax Financial Holdings or generate 7.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Nickel Creek Platinum
Performance |
| Timeline |
| Fairfax Financial |
| Nickel Creek Platinum |
Fairfax Financial and Nickel Creek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Nickel Creek
The main advantage of trading using opposite Fairfax Financial and Nickel Creek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Nickel Creek 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 Nickel Creek will offset losses from the drop in Nickel Creek'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 |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |