Correlation Between HOME DEPOT and Fairfax Financial
Can any of the company-specific risk be diversified away by investing in both HOME DEPOT 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 HOME DEPOT and Fairfax Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HOME DEPOT CDR and Fairfax Financial Holdings, you can compare the effects of market volatilities on HOME DEPOT 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 HOME DEPOT with a short position of Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of HOME DEPOT and Fairfax Financial.
Diversification Opportunities for HOME DEPOT and Fairfax Financial
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between HOME and Fairfax is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding HOME DEPOT CDR and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and HOME DEPOT 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 HOME DEPOT CDR 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 HOME DEPOT i.e., HOME DEPOT and Fairfax Financial go up and down completely randomly.
Pair Corralation between HOME DEPOT and Fairfax Financial
Assuming the 90 days trading horizon HOME DEPOT is expected to generate 3.05 times less return on investment than Fairfax Financial. But when comparing it to its historical volatility, HOME DEPOT CDR is 1.91 times less risky than Fairfax Financial. It trades about 0.26 of its potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 1,750 in Fairfax Financial Holdings on September 3, 2024 and sell it today you would earn a total of 480.00 from holding Fairfax Financial Holdings or generate 27.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HOME DEPOT CDR vs. Fairfax Financial Holdings
Performance |
| Timeline |
| HOME DEPOT CDR |
| Fairfax Financial |
HOME DEPOT and Fairfax Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HOME DEPOT and Fairfax Financial
The main advantage of trading using opposite HOME DEPOT and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HOME DEPOT 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.| HOME DEPOT vs. Canlan Ice Sports | HOME DEPOT vs. Lion One Metals | HOME DEPOT vs. Algonquin Power Utilities | HOME DEPOT vs. Perseus Mining |
| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. Fairfax Financial Holdings | Fairfax Financial vs. Fairfax Fin Hld | Fairfax Financial vs. Intact Financial Corp |
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 Directory module to find actively traded commodities issued by global exchanges.
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