Correlation Between Fairfax Financial and Galaxy Digital
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Galaxy Digital 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 Galaxy Digital 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 Galaxy Digital Holdings, you can compare the effects of market volatilities on Fairfax Financial and Galaxy Digital 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 Galaxy Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Galaxy Digital.
Diversification Opportunities for Fairfax Financial and Galaxy Digital
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Fairfax and Galaxy is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Galaxy Digital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galaxy Digital Holdings 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 Galaxy Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galaxy Digital Holdings has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Galaxy Digital go up and down completely randomly.
Pair Corralation between Fairfax Financial and Galaxy Digital
Assuming the 90 days trading horizon Fairfax Financial is expected to generate 2.69 times less return on investment than Galaxy Digital. But when comparing it to its historical volatility, Fairfax Financial Holdings is 3.29 times less risky than Galaxy Digital. It trades about 0.13 of its potential returns per unit of risk. Galaxy Digital Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 346.00 in Galaxy Digital Holdings on September 14, 2024 and sell it today you would earn a total of 2,399 from holding Galaxy Digital Holdings or generate 693.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Galaxy Digital Holdings
Performance |
| Timeline |
| Fairfax Financial |
| Galaxy Digital Holdings |
Fairfax Financial and Galaxy Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Galaxy Digital
The main advantage of trading using opposite Fairfax Financial and Galaxy Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Galaxy Digital 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 Galaxy Digital will offset losses from the drop in Galaxy Digital's long position.| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex Corp |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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