Correlation Between Fairfax Financial and Obsidian Energy
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Obsidian 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 Obsidian 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 Obsidian Energy, you can compare the effects of market volatilities on Fairfax Financial and Obsidian 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 Obsidian Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Obsidian Energy.
Diversification Opportunities for Fairfax Financial and Obsidian Energy
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fairfax and Obsidian is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Obsidian Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Obsidian 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 Obsidian Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Obsidian Energy has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Obsidian Energy go up and down completely randomly.
Pair Corralation between Fairfax Financial and Obsidian Energy
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.66 times more return on investment than Obsidian Energy. However, Fairfax Financial Holdings is 1.51 times less risky than Obsidian Energy. It trades about 0.14 of its potential returns per unit of risk. Obsidian Energy is currently generating about 0.01 per unit of risk. If you would invest 97,024 in Fairfax Financial Holdings on August 28, 2024 and sell it today you would earn a total of 98,485 from holding Fairfax Financial Holdings or generate 101.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Obsidian Energy
Performance |
| Timeline |
| Fairfax Financial |
| Obsidian Energy |
Fairfax Financial and Obsidian Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Obsidian Energy
The main advantage of trading using opposite Fairfax Financial and Obsidian Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Obsidian 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 Obsidian Energy will offset losses from the drop in Obsidian 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 |
| Obsidian Energy vs. Bonterra Energy Corp | Obsidian Energy vs. Cardinal Energy | Obsidian Energy vs. Surge Energy | Obsidian Energy vs. InPlay Oil Corp |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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