Correlation Between Forstrong Global and Fairfax Financial
Can any of the company-specific risk be diversified away by investing in both Forstrong Global and Fairfax Financial 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 Forstrong Global and Fairfax Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Forstrong Global Income and Fairfax Financial Holdings, you can compare the effects of market volatilities on Forstrong Global and Fairfax Financial 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 Forstrong Global with a short position of Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forstrong Global and Fairfax Financial.
Diversification Opportunities for Forstrong Global and Fairfax Financial
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Forstrong and Fairfax is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Forstrong Global Income and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and Forstrong Global 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 Forstrong Global Income are associated (or correlated) with Fairfax Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairfax Financial has no effect on the direction of Forstrong Global i.e., Forstrong Global and Fairfax Financial go up and down completely randomly.
Pair Corralation between Forstrong Global and Fairfax Financial
Assuming the 90 days trading horizon Forstrong Global Income is expected to under-perform the Fairfax Financial. But the etf apears to be less risky and, when comparing its historical volatility, Forstrong Global Income is 6.74 times less risky than Fairfax Financial. The etf trades about -0.08 of its potential returns per unit of risk. The Fairfax Financial Holdings is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 1,930 in Fairfax Financial Holdings on August 27, 2024 and sell it today you would earn a total of 315.00 from holding Fairfax Financial Holdings or generate 16.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Forstrong Global Income vs. Fairfax Financial Holdings
Performance |
| Timeline |
| Forstrong Global Income |
| Fairfax Financial |
Forstrong Global and Fairfax Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Forstrong Global and Fairfax Financial
The main advantage of trading using opposite Forstrong Global and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Forstrong Global position performs unexpectedly, Fairfax Financial 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 Fairfax Financial will offset losses from the drop in Fairfax Financial's long position.| Forstrong Global vs. iShares SPTSX 60 | Forstrong Global vs. iShares Core SP | Forstrong Global vs. iShares Core SPTSX | Forstrong Global vs. BMO Aggregate Bond |
| Fairfax Financial vs. Forstrong Global Income | Fairfax Financial vs. BMO Aggregate Bond | Fairfax Financial vs. Terreno Resources Corp | Fairfax Financial vs. iShares Canadian HYBrid |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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