Correlation Between Fairfax Financial and ALX Uranium
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and ALX Uranium 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 ALX Uranium 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 ALX Uranium Corp, you can compare the effects of market volatilities on Fairfax Financial and ALX Uranium 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 ALX Uranium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and ALX Uranium.
Diversification Opportunities for Fairfax Financial and ALX Uranium
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fairfax and ALX is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and ALX Uranium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALX Uranium 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 ALX Uranium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALX Uranium Corp has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and ALX Uranium go up and down completely randomly.
Pair Corralation between Fairfax Financial and ALX Uranium
Assuming the 90 days trading horizon Fairfax Financial is expected to generate 6.4 times less return on investment than ALX Uranium. But when comparing it to its historical volatility, Fairfax Financial Holdings is 16.78 times less risky than ALX Uranium. It trades about 0.22 of its potential returns per unit of risk. ALX Uranium Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3.00 in ALX Uranium Corp on September 2, 2024 and sell it today you would earn a total of 0.00 from holding ALX Uranium Corp or generate 0.0% 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. ALX Uranium Corp
Performance |
| Timeline |
| Fairfax Financial |
| ALX Uranium Corp |
Fairfax Financial and ALX Uranium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and ALX Uranium
The main advantage of trading using opposite Fairfax Financial and ALX Uranium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, ALX Uranium 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 ALX Uranium will offset losses from the drop in ALX Uranium's long position.| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex Corp |
| ALX Uranium vs. ValOre Metals Corp | ALX Uranium vs. Forum Energy Metals | ALX Uranium vs. Purepoint Uranium Group | ALX Uranium vs. Blue Sky Uranium |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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