Correlation Between Fairfax Financial and Pason Systems
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Pason Systems 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 Pason Systems 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 Pason Systems, you can compare the effects of market volatilities on Fairfax Financial and Pason Systems 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 Pason Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Pason Systems.
Diversification Opportunities for Fairfax Financial and Pason Systems
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fairfax and Pason is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Pason Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pason Systems 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 Pason Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pason Systems has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Pason Systems go up and down completely randomly.
Pair Corralation between Fairfax Financial and Pason Systems
Assuming the 90 days trading horizon Fairfax Financial is expected to generate 1.75 times less return on investment than Pason Systems. But when comparing it to its historical volatility, Fairfax Financial Holdings is 4.94 times less risky than Pason Systems. It trades about 0.38 of its potential returns per unit of risk. Pason Systems is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,346 in Pason Systems on August 31, 2024 and sell it today you would earn a total of 83.00 from holding Pason Systems or generate 6.17% 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. Pason Systems
Performance |
| Timeline |
| Fairfax Financial |
| Pason Systems |
Fairfax Financial and Pason Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Pason Systems
The main advantage of trading using opposite Fairfax Financial and Pason Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Pason Systems 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 Pason Systems will offset losses from the drop in Pason Systems' 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 |
| Pason Systems vs. Forum Energy Metals | Pason Systems vs. iShares Canadian HYBrid | Pason Systems vs. Brompton European Dividend | Pason Systems vs. Solar Alliance Energy |
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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