Correlation Between Fairfax Financial and Mercury General
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Mercury General 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 Mercury General 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 Mercury General, you can compare the effects of market volatilities on Fairfax Financial and Mercury General 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 Mercury General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Mercury General.
Diversification Opportunities for Fairfax Financial and Mercury General
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fairfax and Mercury is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Mercury General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercury General 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 Mercury General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercury General has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Mercury General go up and down completely randomly.
Pair Corralation between Fairfax Financial and Mercury General
If you would invest 6,784 in Mercury General on August 27, 2024 and sell it today you would earn a total of 943.00 from holding Mercury General or generate 13.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 4.76% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Mercury General
Performance |
| Timeline |
| Fairfax Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Mercury General |
Fairfax Financial and Mercury General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Mercury General
The main advantage of trading using opposite Fairfax Financial and Mercury General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Mercury General 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 Mercury General will offset losses from the drop in Mercury General's long position.| Fairfax Financial vs. RLI Corp | Fairfax Financial vs. Chubb | Fairfax Financial vs. Progressive Corp | Fairfax Financial vs. White Mountains Insurance |
| Mercury General vs. Selective Insurance Group | Mercury General vs. Kemper | Mercury General vs. Donegal Group B | Mercury General vs. Argo Group International |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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