Correlation Between Fairfax Financial and Journey Energy
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Journey Energy 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 Journey Energy 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 Journey Energy, you can compare the effects of market volatilities on Fairfax Financial and Journey Energy 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 Journey Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Journey Energy.
Diversification Opportunities for Fairfax Financial and Journey Energy
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fairfax and Journey is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Journey Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Journey Energy 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 Journey Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Journey Energy has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Journey Energy go up and down completely randomly.
Pair Corralation between Fairfax Financial and Journey Energy
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.52 times more return on investment than Journey Energy. However, Fairfax Financial Holdings is 1.94 times less risky than Journey Energy. It trades about 0.12 of its potential returns per unit of risk. Journey Energy is currently generating about -0.07 per unit of risk. If you would invest 93,874 in Fairfax Financial Holdings on November 19, 2024 and sell it today you would earn a total of 113,145 from holding Fairfax Financial Holdings or generate 120.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Journey Energy
Performance |
| Timeline |
| Fairfax Financial |
| Journey Energy |
Fairfax Financial and Journey Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Journey Energy
The main advantage of trading using opposite Fairfax Financial and Journey Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Journey Energy 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 Journey Energy will offset losses from the drop in Journey Energy's long position.| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex Corp |
| Journey Energy vs. Gear Energy | Journey Energy vs. InPlay Oil Corp | Journey Energy vs. Headwater Exploration | Journey Energy vs. Cardinal Energy |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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