Correlation Between Fairfax Financial and Labrador Iron
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Labrador Iron 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 Labrador Iron 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 Labrador Iron Ore, you can compare the effects of market volatilities on Fairfax Financial and Labrador Iron 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 Labrador Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Labrador Iron.
Diversification Opportunities for Fairfax Financial and Labrador Iron
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fairfax and Labrador is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Labrador Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Labrador Iron Ore 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 Labrador Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Labrador Iron Ore has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Labrador Iron go up and down completely randomly.
Pair Corralation between Fairfax Financial and Labrador Iron
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 1.16 times more return on investment than Labrador Iron. However, Fairfax Financial is 1.16 times more volatile than Labrador Iron Ore. It trades about 0.14 of its potential returns per unit of risk. Labrador Iron Ore is currently generating about 0.03 per unit of risk. If you would invest 98,686 in Fairfax Financial Holdings on September 12, 2024 and sell it today you would earn a total of 101,119 from holding Fairfax Financial Holdings or generate 102.47% 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. Labrador Iron Ore
Performance |
| Timeline |
| Fairfax Financial |
| Labrador Iron Ore |
Fairfax Financial and Labrador Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Labrador Iron
The main advantage of trading using opposite Fairfax Financial and Labrador Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Labrador Iron 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 Labrador Iron will offset losses from the drop in Labrador Iron's long position.| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex Corp |
| Labrador Iron vs. Keyera Corp | Labrador Iron vs. Russel Metals | Labrador Iron vs. Freehold Royalties | Labrador Iron vs. Capital Power |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
Other Complementary Tools
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |