Correlation Between Fairfax Financial and Doman Building
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Doman Building 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 Doman Building 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 Doman Building Materials, you can compare the effects of market volatilities on Fairfax Financial and Doman Building 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 Doman Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Doman Building.
Diversification Opportunities for Fairfax Financial and Doman Building
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fairfax and Doman is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Doman Building Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doman Building Materials 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 Doman Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doman Building Materials has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Doman Building go up and down completely randomly.
Pair Corralation between Fairfax Financial and Doman Building
Assuming the 90 days trading horizon Fairfax Financial is expected to generate 1.34 times less return on investment than Doman Building. But when comparing it to its historical volatility, Fairfax Financial Holdings is 1.1 times less risky than Doman Building. It trades about 0.14 of its potential returns per unit of risk. Doman Building Materials is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 702.00 in Doman Building Materials on September 3, 2024 and sell it today you would earn a total of 276.00 from holding Doman Building Materials or generate 39.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Doman Building Materials
Performance |
| Timeline |
| Fairfax Financial |
| Doman Building Materials |
Fairfax Financial and Doman Building Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Doman Building
The main advantage of trading using opposite Fairfax Financial and Doman Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Doman Building 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 Doman Building will offset losses from the drop in Doman Building's long position.| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex Corp |
| Doman Building vs. Alaris Equity Partners | Doman Building vs. Timbercreek Financial Corp | Doman Building vs. Fiera Capital | Doman Building vs. Diversified Royalty 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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