Correlation Between Fairfax Financial and Champion Iron
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Champion Iron 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 Champion Iron 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 Champion Iron, you can compare the effects of market volatilities on Fairfax Financial and Champion Iron 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 Champion Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Champion Iron.
Diversification Opportunities for Fairfax Financial and Champion Iron
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fairfax and Champion is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Champion Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron 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 Champion Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champion Iron has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Champion Iron go up and down completely randomly.
Pair Corralation between Fairfax Financial and Champion Iron
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.63 times more return on investment than Champion Iron. However, Fairfax Financial Holdings is 1.58 times less risky than Champion Iron. It trades about 0.12 of its potential returns per unit of risk. Champion Iron is currently generating about 0.03 per unit of risk. If you would invest 109,804 in Fairfax Financial Holdings on September 12, 2024 and sell it today you would earn a total of 90,001 from holding Fairfax Financial Holdings or generate 81.97% 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. Champion Iron
Performance |
| Timeline |
| Fairfax Financial |
| Champion Iron |
Fairfax Financial and Champion Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Champion Iron
The main advantage of trading using opposite Fairfax Financial and Champion Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Champion Iron 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 Champion Iron will offset losses from the drop in Champion Iron's long position.| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex Corp |
| Champion Iron vs. Ressources Minieres Radisson | Champion Iron vs. Galantas Gold Corp | Champion Iron vs. Red Pine Exploration | Champion Iron vs. Kore 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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