Correlation Between Fairfax Financial and Eddy Smart
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Eddy Smart 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 Eddy Smart 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 Eddy Smart Home, you can compare the effects of market volatilities on Fairfax Financial and Eddy Smart 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 Eddy Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Eddy Smart.
Diversification Opportunities for Fairfax Financial and Eddy Smart
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Fairfax and Eddy is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Eddy Smart Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eddy Smart Home 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 Eddy Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eddy Smart Home has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Eddy Smart go up and down completely randomly.
Pair Corralation between Fairfax Financial and Eddy Smart
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.22 times more return on investment than Eddy Smart. However, Fairfax Financial Holdings is 4.61 times less risky than Eddy Smart. It trades about 0.76 of its potential returns per unit of risk. Eddy Smart Home is currently generating about -0.38 per unit of risk. If you would invest 181,522 in Fairfax Financial Holdings on September 3, 2024 and sell it today you would earn a total of 19,180 from holding Fairfax Financial Holdings or generate 10.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Eddy Smart Home
Performance |
| Timeline |
| Fairfax Financial |
| Eddy Smart Home |
Fairfax Financial and Eddy Smart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Eddy Smart
The main advantage of trading using opposite Fairfax Financial and Eddy Smart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Eddy Smart 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 Eddy Smart will offset losses from the drop in Eddy Smart's long position.| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex Corp |
| Eddy Smart vs. Enghouse Systems | Eddy Smart vs. Pulse Seismic | Eddy Smart vs. Harvest Global REIT | Eddy Smart vs. International Zeolite 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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