Correlation Between Fairfax Financial and Canfor
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Canfor 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 Canfor 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 Canfor, you can compare the effects of market volatilities on Fairfax Financial and Canfor 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 Canfor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Canfor.
Diversification Opportunities for Fairfax Financial and Canfor
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fairfax and Canfor is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Canfor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canfor 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 Canfor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canfor has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Canfor go up and down completely randomly.
Pair Corralation between Fairfax Financial and Canfor
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 1.01 times more return on investment than Canfor. However, Fairfax Financial is 1.01 times more volatile than Canfor. It trades about 0.09 of its potential returns per unit of risk. Canfor is currently generating about -0.06 per unit of risk. If you would invest 199,836 in Fairfax Financial Holdings on November 27, 2024 and sell it today you would earn a total of 4,365 from holding Fairfax Financial Holdings or generate 2.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Canfor
Performance |
| Timeline |
| Fairfax Financial |
| Canfor |
Fairfax Financial and Canfor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Canfor
The main advantage of trading using opposite Fairfax Financial and Canfor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Canfor 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 Canfor will offset losses from the drop in Canfor's long position.| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex Corp |
| Canfor vs. Adex Mining | Canfor vs. Metalero Mining Corp | Canfor vs. Labrador Iron Ore | Canfor vs. Perseus Mining |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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