Correlation Between Labrador Iron and Fairfax Fin
Can any of the company-specific risk be diversified away by investing in both Labrador Iron and Fairfax Fin 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 Labrador Iron and Fairfax Fin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Labrador Iron Ore and Fairfax Fin Hld, you can compare the effects of market volatilities on Labrador Iron and Fairfax Fin 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 Labrador Iron with a short position of Fairfax Fin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Labrador Iron and Fairfax Fin.
Diversification Opportunities for Labrador Iron and Fairfax Fin
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Labrador and Fairfax is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Labrador Iron Ore and Fairfax Fin Hld in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Fin Hld and Labrador Iron 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 Labrador Iron Ore are associated (or correlated) with Fairfax Fin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairfax Fin Hld has no effect on the direction of Labrador Iron i.e., Labrador Iron and Fairfax Fin go up and down completely randomly.
Pair Corralation between Labrador Iron and Fairfax Fin
Assuming the 90 days trading horizon Labrador Iron Ore is expected to under-perform the Fairfax Fin. But the stock apears to be less risky and, when comparing its historical volatility, Labrador Iron Ore is 2.52 times less risky than Fairfax Fin. The stock trades about -0.11 of its potential returns per unit of risk. The Fairfax Fin Hld is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 1,793 in Fairfax Fin Hld on September 2, 2024 and sell it today you would earn a total of 349.00 from holding Fairfax Fin Hld or generate 19.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Labrador Iron Ore vs. Fairfax Fin Hld
Performance |
| Timeline |
| Labrador Iron Ore |
| Fairfax Fin Hld |
Labrador Iron and Fairfax Fin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Labrador Iron and Fairfax Fin
The main advantage of trading using opposite Labrador Iron and Fairfax Fin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Labrador Iron position performs unexpectedly, Fairfax Fin 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 Fin will offset losses from the drop in Fairfax Fin's long position.| Labrador Iron vs. Keyera Corp | Labrador Iron vs. Russel Metals | Labrador Iron vs. Freehold Royalties | Labrador Iron vs. Capital Power |
| Fairfax Fin vs. Fairfax Financial Holdings | Fairfax Fin vs. Fairfax Financial Holdings | Fairfax Fin vs. Fairfax Financial Holdings | Fairfax Fin vs. Fairfax Financial Holdings |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Stocks Directory Find actively traded stocks across global markets | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |