Correlation Between Fairfax Financial and Power Financial
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Power Financial 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 Power Financial 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 Power Financial Corp, you can compare the effects of market volatilities on Fairfax Financial and Power Financial 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 Power Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Power Financial.
Diversification Opportunities for Fairfax Financial and Power Financial
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fairfax and Power is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Power Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Financial 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 Power Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Financial Corp has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Power Financial go up and down completely randomly.
Pair Corralation between Fairfax Financial and Power Financial
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate about the same return on investment as Power Financial Corp. But, Fairfax Financial Holdings is 2.03 times less risky than Power Financial. It trades about 0.14 of its potential returns per unit of risk. Power Financial Corp is currently generating about 0.07 per unit of risk. If you would invest 1,341 in Power Financial Corp on September 14, 2024 and sell it today you would earn a total of 327.00 from holding Power Financial Corp or generate 24.38% 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. Power Financial Corp
Performance |
| Timeline |
| Fairfax Financial |
| Power Financial Corp |
Fairfax Financial and Power Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Power Financial
The main advantage of trading using opposite Fairfax Financial and Power Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Power Financial 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 Power Financial will offset losses from the drop in Power Financial's long position.| Fairfax Financial vs. Enerev5 Metals | Fairfax Financial vs. Talon Metals Corp | Fairfax Financial vs. Forsys Metals Corp | Fairfax Financial vs. Andlauer Healthcare Gr |
| Power Financial vs. Reliq Health Technologies | Power Financial vs. Mako Mining Corp | Power Financial vs. NeuPath Health | Power Financial vs. Forsys Metals Corp |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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