Correlation Between Fairfax Financial and Canadian Imperial
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Canadian Imperial 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 Canadian Imperial 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 Canadian Imperial Bank, you can compare the effects of market volatilities on Fairfax Financial and Canadian Imperial 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 Canadian Imperial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Canadian Imperial.
Diversification Opportunities for Fairfax Financial and Canadian Imperial
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fairfax and Canadian is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Canadian Imperial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Imperial Bank 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 Canadian Imperial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Imperial Bank has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Canadian Imperial go up and down completely randomly.
Pair Corralation between Fairfax Financial and Canadian Imperial
Assuming the 90 days trading horizon Fairfax Financial is expected to generate 1.04 times less return on investment than Canadian Imperial. But when comparing it to its historical volatility, Fairfax Financial Holdings is 1.06 times less risky than Canadian Imperial. It trades about 0.39 of its potential returns per unit of risk. Canadian Imperial Bank is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 8,795 in Canadian Imperial Bank on August 27, 2024 and sell it today you would earn a total of 347.00 from holding Canadian Imperial Bank or generate 3.95% 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. Canadian Imperial Bank
Performance |
| Timeline |
| Fairfax Financial |
| Canadian Imperial Bank |
Fairfax Financial and Canadian Imperial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Canadian Imperial
The main advantage of trading using opposite Fairfax Financial and Canadian Imperial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Canadian Imperial 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 Canadian Imperial will offset losses from the drop in Canadian Imperial's long position.| Fairfax Financial vs. Forstrong Global Income | Fairfax Financial vs. BMO Aggregate Bond | Fairfax Financial vs. Terreno Resources Corp | Fairfax Financial vs. iShares Canadian HYBrid |
| Canadian Imperial vs. Bank of Montreal | Canadian Imperial vs. Bank of Nova | Canadian Imperial vs. Royal Bank of | Canadian Imperial vs. Toronto Dominion Bank |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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