Correlation Between IA Financial and Fairfax Financial
Can any of the company-specific risk be diversified away by investing in both IA Financial 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 IA Financial and Fairfax Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iA Financial and Fairfax Financial Holdings, you can compare the effects of market volatilities on IA Financial 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 IA Financial with a short position of Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of IA Financial and Fairfax Financial.
Diversification Opportunities for IA Financial and Fairfax Financial
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IAG and Fairfax is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding iA Financial and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and IA 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 iA Financial 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 IA Financial i.e., IA Financial and Fairfax Financial go up and down completely randomly.
Pair Corralation between IA Financial and Fairfax Financial
Assuming the 90 days trading horizon iA Financial is expected to under-perform the Fairfax Financial. But the stock apears to be less risky and, when comparing its historical volatility, iA Financial is 1.18 times less risky than Fairfax Financial. The stock trades about -0.11 of its potential returns per unit of risk. The Fairfax Financial Holdings is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 200,301 in Fairfax Financial Holdings on October 22, 2024 and sell it today you would lose (745.00) from holding Fairfax Financial Holdings or give up 0.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 94.74% |
| Values | Daily Returns |
iA Financial vs. Fairfax Financial Holdings
Performance |
| Timeline |
| iA Financial |
| Fairfax Financial |
IA Financial and Fairfax Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IA Financial and Fairfax Financial
The main advantage of trading using opposite IA Financial and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IA Financial 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.| IA Financial vs. Great West Lifeco | IA Financial vs. Intact Financial | IA Financial vs. IGM Financial | IA Financial vs. Sun Life Financial |
| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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