Correlation Between Fairfax Financial and BOEING CDR
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and BOEING CDR 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 BOEING CDR 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 BOEING CDR, you can compare the effects of market volatilities on Fairfax Financial and BOEING CDR 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 BOEING CDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and BOEING CDR.
Diversification Opportunities for Fairfax Financial and BOEING CDR
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fairfax and BOEING is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and BOEING CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOEING 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 BOEING CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOEING CDR has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and BOEING CDR go up and down completely randomly.
Pair Corralation between Fairfax Financial and BOEING CDR
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.2 times more return on investment than BOEING CDR. However, Fairfax Financial Holdings is 5.13 times less risky than BOEING CDR. It trades about 0.38 of its potential returns per unit of risk. BOEING CDR is currently generating about 0.01 per unit of risk. If you would invest 2,410 in Fairfax Financial Holdings on August 31, 2024 and sell it today you would earn a total of 90.00 from holding Fairfax Financial Holdings or generate 3.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. BOEING CDR
Performance |
| Timeline |
| Fairfax Financial |
| BOEING CDR |
Fairfax Financial and BOEING CDR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and BOEING CDR
The main advantage of trading using opposite Fairfax Financial and BOEING CDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, BOEING CDR 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 BOEING CDR will offset losses from the drop in BOEING CDR's long position.| Fairfax Financial vs. Fairfax Financial Holdings | Fairfax Financial vs. iShares Canadian HYBrid | Fairfax Financial vs. Brompton European Dividend | Fairfax Financial vs. Solar Alliance Energy |
| BOEING CDR vs. Cogeco Communications | BOEING CDR vs. Canso Select Opportunities | BOEING CDR vs. Endeavour Silver Corp | BOEING CDR vs. Monument Mining Limited |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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