Correlation Between Fairfax Financial and Profound Medical
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Profound Medical 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 Profound Medical 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 Profound Medical Corp, you can compare the effects of market volatilities on Fairfax Financial and Profound Medical 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 Profound Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Profound Medical.
Diversification Opportunities for Fairfax Financial and Profound Medical
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fairfax and Profound is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Profound Medical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Profound Medical Corp 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 Profound Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Profound Medical Corp has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Profound Medical go up and down completely randomly.
Pair Corralation between Fairfax Financial and Profound Medical
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.36 times more return on investment than Profound Medical. However, Fairfax Financial Holdings is 2.76 times less risky than Profound Medical. It trades about 0.28 of its potential returns per unit of risk. Profound Medical Corp is currently generating about -0.1 per unit of risk. If you would invest 187,949 in Fairfax Financial Holdings on September 13, 2024 and sell it today you would earn a total of 10,364 from holding Fairfax Financial Holdings or generate 5.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Profound Medical Corp
Performance |
| Timeline |
| Fairfax Financial |
| Profound Medical Corp |
Fairfax Financial and Profound Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Profound Medical
The main advantage of trading using opposite Fairfax Financial and Profound Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Profound Medical 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 Profound Medical will offset losses from the drop in Profound Medical's long position.| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex Corp |
| Profound Medical vs. HLS Therapeutics | Profound Medical vs. Medicenna Therapeutics Corp | Profound Medical vs. Aptose Biosciences |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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