Correlation Between Fairfax Financial and Western Copper
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Western Copper 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 Western Copper 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 Western Copper and, you can compare the effects of market volatilities on Fairfax Financial and Western Copper 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 Western Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Western Copper.
Diversification Opportunities for Fairfax Financial and Western Copper
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fairfax and Western is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper 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 Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Western Copper go up and down completely randomly.
Pair Corralation between Fairfax Financial and Western Copper
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.32 times more return on investment than Western Copper. However, Fairfax Financial Holdings is 3.12 times less risky than Western Copper. It trades about 0.11 of its potential returns per unit of risk. Western Copper and is currently generating about -0.01 per unit of risk. If you would invest 1,675 in Fairfax Financial Holdings on August 31, 2024 and sell it today you would earn a total of 725.00 from holding Fairfax Financial Holdings or generate 43.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Western Copper and
Performance |
| Timeline |
| Fairfax Financial |
| Western Copper |
Fairfax Financial and Western Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Western Copper
The main advantage of trading using opposite Fairfax Financial and Western Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Western Copper 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 Western Copper will offset losses from the drop in Western Copper'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 |
| Western Copper vs. Solar Alliance Energy | Western Copper vs. Global X Active | Western Copper vs. Financial 15 Split | Western Copper vs. Rubicon Organics |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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