Correlation Between Fairfax Financial and Kelt Exploration
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Kelt Exploration 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 Kelt Exploration 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 Kelt Exploration, you can compare the effects of market volatilities on Fairfax Financial and Kelt Exploration 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 Kelt Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Kelt Exploration.
Diversification Opportunities for Fairfax Financial and Kelt Exploration
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fairfax and Kelt is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Kelt Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kelt Exploration 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 Kelt Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kelt Exploration has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Kelt Exploration go up and down completely randomly.
Pair Corralation between Fairfax Financial and Kelt Exploration
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 1.0 times more return on investment than Kelt Exploration. However, Fairfax Financial is 1.0 times more volatile than Kelt Exploration. It trades about 0.26 of its potential returns per unit of risk. Kelt Exploration is currently generating about 0.15 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. Kelt Exploration
Performance |
| Timeline |
| Fairfax Financial |
| Kelt Exploration |
Fairfax Financial and Kelt Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Kelt Exploration
The main advantage of trading using opposite Fairfax Financial and Kelt Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Kelt Exploration 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 Kelt Exploration will offset losses from the drop in Kelt Exploration's long position.| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex Corp |
| Kelt Exploration vs. NuVista Energy | Kelt Exploration vs. Advantage Oil Gas | Kelt Exploration vs. Birchcliff Energy | Kelt Exploration 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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