Correlation Between Fairfax Financial and Cal-Maine Foods
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Cal-Maine Foods 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 Cal-Maine Foods 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 Cal Maine Foods, you can compare the effects of market volatilities on Fairfax Financial and Cal-Maine Foods 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 Cal-Maine Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Cal-Maine Foods.
Diversification Opportunities for Fairfax Financial and Cal-Maine Foods
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fairfax and Cal-Maine is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Cal Maine Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cal Maine Foods 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 Cal-Maine Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cal Maine Foods has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Cal-Maine Foods go up and down completely randomly.
Pair Corralation between Fairfax Financial and Cal-Maine Foods
Assuming the 90 days horizon Fairfax Financial is expected to generate 1.24 times less return on investment than Cal-Maine Foods. But when comparing it to its historical volatility, Fairfax Financial Holdings is 1.28 times less risky than Cal-Maine Foods. It trades about 0.11 of its potential returns per unit of risk. Cal Maine Foods is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 4,164 in Cal Maine Foods on August 31, 2024 and sell it today you would earn a total of 4,964 from holding Cal Maine Foods or generate 119.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Cal Maine Foods
Performance |
| Timeline |
| Fairfax Financial |
| Cal Maine Foods |
Fairfax Financial and Cal-Maine Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Cal-Maine Foods
The main advantage of trading using opposite Fairfax Financial and Cal-Maine Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Cal-Maine Foods 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 Cal-Maine Foods will offset losses from the drop in Cal-Maine Foods' long position.| Fairfax Financial vs. Constellation Software | Fairfax Financial vs. Alfa Financial Software | Fairfax Financial vs. AXWAY SOFTWARE EO | Fairfax Financial vs. NORWEGIAN AIR SHUT |
| Cal-Maine Foods vs. PICKN PAY STORES | Cal-Maine Foods vs. GungHo Online Entertainment | Cal-Maine Foods vs. SPARTAN STORES | Cal-Maine Foods vs. GALENA MINING LTD |
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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