Correlation Between Fairfax Financial and Brompton Lifeco
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Brompton Lifeco 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 Brompton Lifeco 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 Brompton Lifeco Split, you can compare the effects of market volatilities on Fairfax Financial and Brompton Lifeco 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 Brompton Lifeco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Brompton Lifeco.
Diversification Opportunities for Fairfax Financial and Brompton Lifeco
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fairfax and Brompton is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Brompton Lifeco Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton Lifeco Split 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 Brompton Lifeco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton Lifeco Split has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Brompton Lifeco go up and down completely randomly.
Pair Corralation between Fairfax Financial and Brompton Lifeco
Assuming the 90 days trading horizon Fairfax Financial is expected to generate 1.01 times less return on investment than Brompton Lifeco. But when comparing it to its historical volatility, Fairfax Financial Holdings is 1.43 times less risky than Brompton Lifeco. It trades about 0.12 of its potential returns per unit of risk. Brompton Lifeco Split is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 370.00 in Brompton Lifeco Split on November 2, 2024 and sell it today you would earn a total of 439.00 from holding Brompton Lifeco Split or generate 118.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Brompton Lifeco Split
Performance |
| Timeline |
| Fairfax Financial |
| Brompton Lifeco Split |
Fairfax Financial and Brompton Lifeco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Brompton Lifeco
The main advantage of trading using opposite Fairfax Financial and Brompton Lifeco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Brompton Lifeco 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 Brompton Lifeco will offset losses from the drop in Brompton Lifeco's long position.| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex Corp |
| Brompton Lifeco vs. Life Banc Split | Brompton Lifeco vs. Brompton Split Banc | Brompton Lifeco vs. Dividend Growth Split | Brompton Lifeco vs. Dividend 15 Split |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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