Correlation Between Fairfax Financial and Insurance Australia
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Insurance Australia 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 Insurance Australia 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 Insurance Australia Group, you can compare the effects of market volatilities on Fairfax Financial and Insurance Australia 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 Insurance Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Insurance Australia.
Diversification Opportunities for Fairfax Financial and Insurance Australia
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fairfax and Insurance is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Insurance Australia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Australia 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 Insurance Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insurance Australia has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Insurance Australia go up and down completely randomly.
Pair Corralation between Fairfax Financial and Insurance Australia
Assuming the 90 days horizon Fairfax Financial Holdings is expected to generate 1.0 times more return on investment than Insurance Australia. However, Fairfax Financial Holdings is 1.0 times less risky than Insurance Australia. It trades about 0.13 of its potential returns per unit of risk. Insurance Australia Group is currently generating about 0.1 per unit of risk. If you would invest 59,930 in Fairfax Financial Holdings on August 24, 2024 and sell it today you would earn a total of 71,870 from holding Fairfax Financial Holdings or generate 119.92% 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. Insurance Australia Group
Performance |
| Timeline |
| Fairfax Financial |
| Insurance Australia |
Fairfax Financial and Insurance Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Insurance Australia
The main advantage of trading using opposite Fairfax Financial and Insurance Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Insurance Australia 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 Insurance Australia will offset losses from the drop in Insurance Australia's long position.| Fairfax Financial vs. QBE Insurance Group | Fairfax Financial vs. Insurance Australia Group | Fairfax Financial vs. Superior Plus Corp | Fairfax Financial vs. NMI Holdings |
| Insurance Australia vs. QBE Insurance Group | Insurance Australia vs. Superior Plus Corp | Insurance Australia vs. NMI Holdings | Insurance Australia vs. Origin Agritech |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
Other Complementary Tools
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like |