Correlation Between Fairfax Financial and Exco Technologies
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Exco Technologies 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 Exco Technologies 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 Exco Technologies Limited, you can compare the effects of market volatilities on Fairfax Financial and Exco Technologies 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 Exco Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Exco Technologies.
Diversification Opportunities for Fairfax Financial and Exco Technologies
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fairfax and Exco is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Exco Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exco Technologies 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 Exco Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exco Technologies has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Exco Technologies go up and down completely randomly.
Pair Corralation between Fairfax Financial and Exco Technologies
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 1.39 times more return on investment than Exco Technologies. However, Fairfax Financial is 1.39 times more volatile than Exco Technologies Limited. It trades about 0.19 of its potential returns per unit of risk. Exco Technologies Limited is currently generating about 0.04 per unit of risk. If you would invest 163,325 in Fairfax Financial Holdings on September 2, 2024 and sell it today you would earn a total of 35,305 from holding Fairfax Financial Holdings or generate 21.62% 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. Exco Technologies Limited
Performance |
| Timeline |
| Fairfax Financial |
| Exco Technologies |
Fairfax Financial and Exco Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Exco Technologies
The main advantage of trading using opposite Fairfax Financial and Exco Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Exco Technologies 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 Exco Technologies will offset losses from the drop in Exco Technologies' long position.| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex Corp |
| Exco Technologies vs. Transcontinental | Exco Technologies vs. Methanex | Exco Technologies vs. Stella Jones | Exco Technologies vs. High Liner Foods |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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