Correlation Between Fairfax Financial and Clarke
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Clarke 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 Clarke 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 Clarke Inc, you can compare the effects of market volatilities on Fairfax Financial and Clarke 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 Clarke. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Clarke.
Diversification Opportunities for Fairfax Financial and Clarke
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Fairfax and Clarke is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Clarke Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clarke Inc 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 Clarke. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clarke Inc has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Clarke go up and down completely randomly.
Pair Corralation between Fairfax Financial and Clarke
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 6.12 times more return on investment than Clarke. However, Fairfax Financial is 6.12 times more volatile than Clarke Inc. It trades about 0.19 of its potential returns per unit of risk. Clarke Inc is currently generating about -0.04 per unit of risk. If you would invest 163,325 in Fairfax Financial Holdings on September 2, 2024 and sell it today you would earn a total of 35,305 from holding Fairfax Financial Holdings or generate 21.62% 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. Clarke Inc
Performance |
| Timeline |
| Fairfax Financial |
| Clarke Inc |
Fairfax Financial and Clarke Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Clarke
The main advantage of trading using opposite Fairfax Financial and Clarke positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Clarke 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 Clarke will offset losses from the drop in Clarke's long position.| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex Corp |
| Clarke vs. Terravest Capital | Clarke vs. Clairvest Group | Clarke vs. Algoma Central | Clarke vs. Accord Financial 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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