Correlation Between Fairfax Financial and Sun Lif
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Sun Lif 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 Sun Lif 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 Sun Lif Non, you can compare the effects of market volatilities on Fairfax Financial and Sun Lif 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 Sun Lif. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Sun Lif.
Diversification Opportunities for Fairfax Financial and Sun Lif
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fairfax and Sun is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Sun Lif Non in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Lif Non 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 Sun Lif. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Lif Non has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Sun Lif go up and down completely randomly.
Pair Corralation between Fairfax Financial and Sun Lif
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to under-perform the Sun Lif. But the preferred stock apears to be less risky and, when comparing its historical volatility, Fairfax Financial Holdings is 1.97 times less risky than Sun Lif. The preferred stock trades about -0.06 of its potential returns per unit of risk. The Sun Lif Non is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest 1,956 in Sun Lif Non on November 5, 2024 and sell it today you would earn a total of 158.00 from holding Sun Lif Non or generate 8.08% 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. Sun Lif Non
Performance |
| Timeline |
| Fairfax Financial |
| Sun Lif Non |
Fairfax Financial and Sun Lif Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Sun Lif
The main advantage of trading using opposite Fairfax Financial and Sun Lif positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Sun Lif 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 Sun Lif will offset losses from the drop in Sun Lif's long position.| Fairfax Financial vs. Goodfood Market Corp | Fairfax Financial vs. Quorum Information Technologies | Fairfax Financial vs. Cogeco Communications | Fairfax Financial vs. Sangoma Technologies Corp |
| Sun Lif vs. Mako Mining Corp | Sun Lif vs. NeXGold Mining Corp | Sun Lif vs. Air Canada | Sun Lif vs. QC Copper and |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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