Correlation Between Fairfax Financial and Economic Investment
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Economic Investment 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 Economic Investment 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 Economic Investment Trust, you can compare the effects of market volatilities on Fairfax Financial and Economic Investment 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 Economic Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Economic Investment.
Diversification Opportunities for Fairfax Financial and Economic Investment
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fairfax and Economic is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Economic Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Economic Investment Trust 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 Economic Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Economic Investment Trust has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Economic Investment go up and down completely randomly.
Pair Corralation between Fairfax Financial and Economic Investment
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 3.62 times more return on investment than Economic Investment. However, Fairfax Financial is 3.62 times more volatile than Economic Investment Trust. It trades about 0.26 of its potential returns per unit of risk. Economic Investment Trust is currently generating about 0.43 per unit of risk. If you would invest 174,228 in Fairfax Financial Holdings on August 25, 2024 and sell it today you would earn a total of 22,773 from holding Fairfax Financial Holdings or generate 13.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Economic Investment Trust
Performance |
| Timeline |
| Fairfax Financial |
| Economic Investment Trust |
Fairfax Financial and Economic Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Economic Investment
The main advantage of trading using opposite Fairfax Financial and Economic Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Economic Investment 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 Economic Investment will offset losses from the drop in Economic Investment's long position.| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex Corp |
| Economic Investment vs. Uniteds Limited | Economic Investment vs. E L Financial Corp | Economic Investment vs. Canadian General Investments | Economic Investment vs. Clairvest Group |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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