Correlation Between Fairfax Financial and Pollard Banknote
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Pollard Banknote 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 Pollard Banknote 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 Pollard Banknote Limited, you can compare the effects of market volatilities on Fairfax Financial and Pollard Banknote 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 Pollard Banknote. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Pollard Banknote.
Diversification Opportunities for Fairfax Financial and Pollard Banknote
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Fairfax and Pollard is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Pollard Banknote Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pollard Banknote 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 Pollard Banknote. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pollard Banknote has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Pollard Banknote go up and down completely randomly.
Pair Corralation between Fairfax Financial and Pollard Banknote
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.5 times more return on investment than Pollard Banknote. However, Fairfax Financial Holdings is 1.99 times less risky than Pollard Banknote. It trades about 0.29 of its potential returns per unit of risk. Pollard Banknote Limited is currently generating about 0.13 per unit of risk. If you would invest 2,225 in Fairfax Financial Holdings on September 1, 2024 and sell it today you would earn a total of 175.00 from holding Fairfax Financial Holdings or generate 7.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Pollard Banknote Limited
Performance |
| Timeline |
| Fairfax Financial |
| Pollard Banknote |
Fairfax Financial and Pollard Banknote Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Pollard Banknote
The main advantage of trading using opposite Fairfax Financial and Pollard Banknote positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Pollard Banknote 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 Pollard Banknote will offset losses from the drop in Pollard Banknote's long position.| Fairfax Financial vs. Upstart Investments | Fairfax Financial vs. Faction Investment Group | Fairfax Financial vs. TUT Fitness Group | Fairfax Financial vs. Leveljump Healthcare Corp |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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