Correlation Between Micron Technology, and Fairfax Financial
Can any of the company-specific risk be diversified away by investing in both Micron Technology, 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 Micron Technology, and Fairfax Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology, and Fairfax Financial Holdings, you can compare the effects of market volatilities on Micron Technology, 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 Micron Technology, with a short position of Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology, and Fairfax Financial.
Diversification Opportunities for Micron Technology, and Fairfax Financial
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Micron and Fairfax is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology, and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and Micron Technology, 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 Micron Technology, 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 Micron Technology, i.e., Micron Technology, and Fairfax Financial go up and down completely randomly.
Pair Corralation between Micron Technology, and Fairfax Financial
Assuming the 90 days trading horizon Micron Technology, is expected to under-perform the Fairfax Financial. In addition to that, Micron Technology, is 8.91 times more volatile than Fairfax Financial Holdings. It trades about -0.09 of its total potential returns per unit of risk. Fairfax Financial Holdings is currently generating about -0.08 per unit of volatility. If you would invest 2,445 in Fairfax Financial Holdings on November 6, 2024 and sell it today you would lose (18.00) from holding Fairfax Financial Holdings or give up 0.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Micron Technology, vs. Fairfax Financial Holdings
Performance |
| Timeline |
| Micron Technology, |
| Fairfax Financial |
Micron Technology, and Fairfax Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology, and Fairfax Financial
The main advantage of trading using opposite Micron Technology, and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology, 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.| Micron Technology, vs. Rogers Communications | Micron Technology, vs. Laurentian Bank | Micron Technology, vs. Royal Road Minerals | Micron Technology, vs. Cogeco Communications |
| Fairfax Financial vs. Fairfax Financial Holdings | Fairfax Financial vs. Fairfax Financial Holdings | Fairfax Financial vs. Fairfax Financial Holdings | Fairfax Financial 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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