Correlation Between HPQ Silicon and Fairfax Financial
Can any of the company-specific risk be diversified away by investing in both HPQ Silicon 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 HPQ Silicon and Fairfax Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HPQ Silicon Resources and Fairfax Financial Holdings, you can compare the effects of market volatilities on HPQ Silicon 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 HPQ Silicon with a short position of Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of HPQ Silicon and Fairfax Financial.
Diversification Opportunities for HPQ Silicon and Fairfax Financial
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HPQ and Fairfax is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding HPQ Silicon Resources and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and HPQ Silicon 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 HPQ Silicon Resources 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 HPQ Silicon i.e., HPQ Silicon and Fairfax Financial go up and down completely randomly.
Pair Corralation between HPQ Silicon and Fairfax Financial
Assuming the 90 days horizon HPQ Silicon is expected to generate 1.98 times less return on investment than Fairfax Financial. In addition to that, HPQ Silicon is 3.82 times more volatile than Fairfax Financial Holdings. It trades about 0.01 of its total potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.09 per unit of volatility. If you would invest 1,505 in Fairfax Financial Holdings on October 28, 2024 and sell it today you would earn a total of 844.00 from holding Fairfax Financial Holdings or generate 56.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HPQ Silicon Resources vs. Fairfax Financial Holdings
Performance |
| Timeline |
| HPQ Silicon Resources |
| Fairfax Financial |
HPQ Silicon and Fairfax Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HPQ Silicon and Fairfax Financial
The main advantage of trading using opposite HPQ Silicon and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HPQ Silicon 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.| HPQ Silicon vs. PyroGenesis Canada | HPQ Silicon vs. Solar Alliance Energy | HPQ Silicon vs. Braille Energy Systems |
| Fairfax Financial vs. Brookfield Asset Management | Fairfax Financial vs. High Liner Foods | Fairfax Financial vs. Primaris Retail RE | Fairfax Financial vs. Cogeco Communications |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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