Correlation Between Fairfax Financial and Rakovina Therapeutics
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Rakovina Therapeutics 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 Rakovina Therapeutics 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 Rakovina Therapeutics, you can compare the effects of market volatilities on Fairfax Financial and Rakovina Therapeutics 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 Rakovina Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Rakovina Therapeutics.
Diversification Opportunities for Fairfax Financial and Rakovina Therapeutics
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fairfax and Rakovina is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Rakovina Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rakovina Therapeutics 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 Rakovina Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rakovina Therapeutics has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Rakovina Therapeutics go up and down completely randomly.
Pair Corralation between Fairfax Financial and Rakovina Therapeutics
Assuming the 90 days trading horizon Fairfax Financial is expected to generate 9.84 times less return on investment than Rakovina Therapeutics. But when comparing it to its historical volatility, Fairfax Financial Holdings is 10.04 times less risky than Rakovina Therapeutics. It trades about 0.21 of its potential returns per unit of risk. Rakovina Therapeutics is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 8.00 in Rakovina Therapeutics on October 22, 2024 and sell it today you would earn a total of 11.00 from holding Rakovina Therapeutics or generate 137.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Rakovina Therapeutics
Performance |
| Timeline |
| Fairfax Financial |
| Rakovina Therapeutics |
Fairfax Financial and Rakovina Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Rakovina Therapeutics
The main advantage of trading using opposite Fairfax Financial and Rakovina Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Rakovina Therapeutics 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 Rakovina Therapeutics will offset losses from the drop in Rakovina Therapeutics' long position.| Fairfax Financial vs. Wilmington Capital Management | Fairfax Financial vs. Xtract One Technologies | Fairfax Financial vs. Highwood Asset Management | Fairfax Financial vs. Northstar Clean Technologies |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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