Correlation Between Fairfax Financial and Advantage Oil
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Advantage Oil 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 Advantage Oil 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 Advantage Oil Gas, you can compare the effects of market volatilities on Fairfax Financial and Advantage Oil 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 Advantage Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Advantage Oil.
Diversification Opportunities for Fairfax Financial and Advantage Oil
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fairfax and Advantage is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Advantage Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Oil Gas 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 Advantage Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantage Oil Gas has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Advantage Oil go up and down completely randomly.
Pair Corralation between Fairfax Financial and Advantage Oil
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.88 times more return on investment than Advantage Oil. However, Fairfax Financial Holdings is 1.13 times less risky than Advantage Oil. It trades about 0.26 of its potential returns per unit of risk. Advantage Oil Gas is currently generating about 0.05 per unit of risk. If you would invest 174,228 in Fairfax Financial Holdings on August 25, 2024 and sell it today you would earn a total of 22,773 from holding Fairfax Financial Holdings or generate 13.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Advantage Oil Gas
Performance |
| Timeline |
| Fairfax Financial |
| Advantage Oil Gas |
Fairfax Financial and Advantage Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Advantage Oil
The main advantage of trading using opposite Fairfax Financial and Advantage Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Advantage Oil 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 Advantage Oil will offset losses from the drop in Advantage Oil's long position.| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex Corp |
| Advantage Oil vs. Birchcliff Energy | Advantage Oil vs. NuVista Energy | Advantage Oil vs. Kelt Exploration | Advantage Oil vs. Peyto ExplorationDevelopment 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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