Correlation Between Fairfax Financial and Stella Jones
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Stella Jones 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 Stella Jones 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 Stella Jones, you can compare the effects of market volatilities on Fairfax Financial and Stella Jones 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 Stella Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Stella Jones.
Diversification Opportunities for Fairfax Financial and Stella Jones
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fairfax and Stella is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Stella Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stella Jones 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 Stella Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stella Jones has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Stella Jones go up and down completely randomly.
Pair Corralation between Fairfax Financial and Stella Jones
Assuming the 90 days trading horizon Fairfax Financial is expected to generate 2.22 times less return on investment than Stella Jones. But when comparing it to its historical volatility, Fairfax Financial Holdings is 2.78 times less risky than Stella Jones. It trades about 0.07 of its potential returns per unit of risk. Stella Jones is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4,774 in Stella Jones on November 2, 2024 and sell it today you would earn a total of 2,336 from holding Stella Jones or generate 48.93% 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. Stella Jones
Performance |
| Timeline |
| Fairfax Financial |
| Stella Jones |
Fairfax Financial and Stella Jones Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Stella Jones
The main advantage of trading using opposite Fairfax Financial and Stella Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Stella Jones 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 Stella Jones will offset losses from the drop in Stella Jones' long position.| Fairfax Financial vs. Sun Peak Metals | Fairfax Financial vs. Magna Mining | Fairfax Financial vs. Brookfield Office Properties | Fairfax Financial vs. Gfl Environmental Holdings |
| Stella Jones vs. Richelieu Hardware | Stella Jones vs. CCL Industries | Stella Jones vs. Stantec | Stella Jones vs. Gildan Activewear |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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