Correlation Between Fairfax Financial and Safety Insurance
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Safety Insurance 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 Safety Insurance 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 Safety Insurance Group, you can compare the effects of market volatilities on Fairfax Financial and Safety Insurance 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 Safety Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Safety Insurance.
Diversification Opportunities for Fairfax Financial and Safety Insurance
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Fairfax and Safety is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Safety Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safety Insurance 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 Safety Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safety Insurance has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Safety Insurance go up and down completely randomly.
Pair Corralation between Fairfax Financial and Safety Insurance
Assuming the 90 days horizon Fairfax Financial Holdings is expected to under-perform the Safety Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Fairfax Financial Holdings is 1.87 times less risky than Safety Insurance. The stock trades about -0.06 of its potential returns per unit of risk. The Safety Insurance Group is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 7,850 in Safety Insurance Group on November 5, 2024 and sell it today you would lose (100.00) from holding Safety Insurance Group or give up 1.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Safety Insurance Group
Performance |
| Timeline |
| Fairfax Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| Safety Insurance |
Fairfax Financial and Safety Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Safety Insurance
The main advantage of trading using opposite Fairfax Financial and Safety Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Safety Insurance 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 Safety Insurance will offset losses from the drop in Safety Insurance's long position.| Fairfax Financial vs. Wenzhou Kangning Hospital | Fairfax Financial vs. RCI Hospitality Holdings | Fairfax Financial vs. Cardinal Health | Fairfax Financial vs. US Physical Therapy |
| Safety Insurance vs. Nordic Semiconductor ASA | Safety Insurance vs. Siamgas And Petrochemicals | Safety Insurance vs. AIR PRODCHEMICALS | Safety Insurance vs. Direct Line Insurance |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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