Correlation Between Fairfax Financial and Imperial Metals
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Imperial Metals 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 Imperial Metals 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 Imperial Metals, you can compare the effects of market volatilities on Fairfax Financial and Imperial Metals 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 Imperial Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Imperial Metals.
Diversification Opportunities for Fairfax Financial and Imperial Metals
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fairfax and Imperial is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Imperial Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Metals 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 Imperial Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Metals has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Imperial Metals go up and down completely randomly.
Pair Corralation between Fairfax Financial and Imperial Metals
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.68 times more return on investment than Imperial Metals. However, Fairfax Financial Holdings is 1.47 times less risky than Imperial Metals. It trades about 0.14 of its potential returns per unit of risk. Imperial Metals is currently generating about -0.01 per unit of risk. If you would invest 158,799 in Fairfax Financial Holdings on September 21, 2024 and sell it today you would earn a total of 40,811 from holding Fairfax Financial Holdings or generate 25.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Imperial Metals
Performance |
| Timeline |
| Fairfax Financial |
| Imperial Metals |
Fairfax Financial and Imperial Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Imperial Metals
The main advantage of trading using opposite Fairfax Financial and Imperial Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Imperial Metals 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 Imperial Metals will offset losses from the drop in Imperial Metals' 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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