Correlation Between Fairfax Financial and Redishred Capital
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Redishred Capital 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 Redishred Capital 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 Redishred Capital Corp, you can compare the effects of market volatilities on Fairfax Financial and Redishred Capital 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 Redishred Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Redishred Capital.
Diversification Opportunities for Fairfax Financial and Redishred Capital
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fairfax and Redishred is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Redishred Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redishred Capital Corp 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 Redishred Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redishred Capital Corp has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Redishred Capital go up and down completely randomly.
Pair Corralation between Fairfax Financial and Redishred Capital
Assuming the 90 days trading horizon Fairfax Financial is expected to generate 1.42 times less return on investment than Redishred Capital. But when comparing it to its historical volatility, Fairfax Financial Holdings is 3.86 times less risky than Redishred Capital. It trades about 0.08 of its potential returns per unit of risk. Redishred Capital Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 392.00 in Redishred Capital Corp on August 24, 2024 and sell it today you would earn a total of 95.00 from holding Redishred Capital Corp or generate 24.23% 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. Redishred Capital Corp
Performance |
| Timeline |
| Fairfax Financial |
| Redishred Capital Corp |
Fairfax Financial and Redishred Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Redishred Capital
The main advantage of trading using opposite Fairfax Financial and Redishred Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Redishred Capital 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 Redishred Capital will offset losses from the drop in Redishred Capital'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 |
| Redishred Capital vs. Kodiak Copper Corp | Redishred Capital vs. Atlas Engineered Products | Redishred Capital vs. FP Newspapers | Redishred Capital vs. NamSys Inc |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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