Correlation Between Fairfax Financial and Tesla
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Tesla 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 Tesla 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 Tesla Inc CDR, you can compare the effects of market volatilities on Fairfax Financial and Tesla 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 Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Tesla.
Diversification Opportunities for Fairfax Financial and Tesla
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fairfax and Tesla is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Tesla Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc CDR 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc CDR has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Tesla go up and down completely randomly.
Pair Corralation between Fairfax Financial and Tesla
Assuming the 90 days trading horizon Fairfax Financial is expected to generate 1.6 times less return on investment than Tesla. But when comparing it to its historical volatility, Fairfax Financial Holdings is 3.93 times less risky than Tesla. It trades about 0.11 of its potential returns per unit of risk. Tesla Inc CDR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,198 in Tesla Inc CDR on August 31, 2024 and sell it today you would earn a total of 942.00 from holding Tesla Inc CDR or generate 42.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Tesla Inc CDR
Performance |
| Timeline |
| Fairfax Financial |
| Tesla Inc CDR |
Fairfax Financial and Tesla Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Tesla
The main advantage of trading using opposite Fairfax Financial and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Tesla 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 Tesla will offset losses from the drop in Tesla'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 |
| Tesla vs. Berkshire Hathaway CDR | Tesla vs. JPMorgan Chase Co | Tesla vs. Bank of America | Tesla vs. Alphabet Inc CDR |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing |