Correlation Between Fairfax Financial and International Tower
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and International Tower 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 International Tower 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 International Tower Hill, you can compare the effects of market volatilities on Fairfax Financial and International Tower 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 International Tower. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and International Tower.
Diversification Opportunities for Fairfax Financial and International Tower
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fairfax and International is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and International Tower Hill in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Tower Hill 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 International Tower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Tower Hill has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and International Tower go up and down completely randomly.
Pair Corralation between Fairfax Financial and International Tower
Assuming the 90 days trading horizon Fairfax Financial is expected to generate 2.56 times less return on investment than International Tower. But when comparing it to its historical volatility, Fairfax Financial Holdings is 5.8 times less risky than International Tower. It trades about 0.39 of its potential returns per unit of risk. International Tower Hill is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 68.00 in International Tower Hill on September 13, 2024 and sell it today you would earn a total of 11.00 from holding International Tower Hill or generate 16.18% 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. International Tower Hill
Performance |
| Timeline |
| Fairfax Financial |
| International Tower Hill |
Fairfax Financial and International Tower Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and International Tower
The main advantage of trading using opposite Fairfax Financial and International Tower positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, International Tower 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 International Tower will offset losses from the drop in International Tower'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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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