Correlation Between Fairfax Financial and Canadian Net
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Canadian Net 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 Canadian Net 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 Canadian Net Real, you can compare the effects of market volatilities on Fairfax Financial and Canadian Net 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 Canadian Net. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Canadian Net.
Diversification Opportunities for Fairfax Financial and Canadian Net
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fairfax and Canadian is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Canadian Net Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Net Real 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 Canadian Net. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Net Real has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Canadian Net go up and down completely randomly.
Pair Corralation between Fairfax Financial and Canadian Net
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.73 times more return on investment than Canadian Net. However, Fairfax Financial Holdings is 1.37 times less risky than Canadian Net. It trades about 0.14 of its potential returns per unit of risk. Canadian Net Real is currently generating about 0.06 per unit of risk. If you would invest 1,784 in Fairfax Financial Holdings on September 14, 2024 and sell it today you would earn a total of 633.00 from holding Fairfax Financial Holdings or generate 35.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Canadian Net Real
Performance |
| Timeline |
| Fairfax Financial |
| Canadian Net Real |
Fairfax Financial and Canadian Net Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Canadian Net
The main advantage of trading using opposite Fairfax Financial and Canadian Net positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Canadian Net 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 Canadian Net will offset losses from the drop in Canadian Net'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 |
| Canadian Net vs. Canadian Apartment Properties | Canadian Net vs. Granite Real Estate | Canadian Net vs. Choice Properties Real | Canadian Net vs. HR Real Estate |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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