Correlation Between Fairfax Financial and Centerra Gold
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Centerra Gold 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 Centerra Gold 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 Centerra Gold, you can compare the effects of market volatilities on Fairfax Financial and Centerra Gold 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 Centerra Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Centerra Gold.
Diversification Opportunities for Fairfax Financial and Centerra Gold
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Fairfax and Centerra is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Centerra Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centerra Gold 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 Centerra Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centerra Gold has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Centerra Gold go up and down completely randomly.
Pair Corralation between Fairfax Financial and Centerra Gold
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.6 times more return on investment than Centerra Gold. However, Fairfax Financial Holdings is 1.68 times less risky than Centerra Gold. It trades about 0.13 of its potential returns per unit of risk. Centerra Gold is currently generating about 0.03 per unit of risk. If you would invest 77,964 in Fairfax Financial Holdings on September 12, 2024 and sell it today you would earn a total of 121,841 from holding Fairfax Financial Holdings or generate 156.28% 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. Centerra Gold
Performance |
| Timeline |
| Fairfax Financial |
| Centerra Gold |
Fairfax Financial and Centerra Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Centerra Gold
The main advantage of trading using opposite Fairfax Financial and Centerra Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Centerra Gold 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 Centerra Gold will offset losses from the drop in Centerra Gold's long position.| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex Corp |
| Centerra Gold vs. Alamos Gold | Centerra Gold vs. NovaGold Resources | Centerra Gold vs. Eldorado Gold Corp | Centerra Gold vs. IAMGold |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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