Correlation Between Open Text and Fairfax Financial
Can any of the company-specific risk be diversified away by investing in both Open Text 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 Open Text and Fairfax Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Open Text Corp and Fairfax Financial Holdings, you can compare the effects of market volatilities on Open Text 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 Open Text with a short position of Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Open Text and Fairfax Financial.
Diversification Opportunities for Open Text and Fairfax Financial
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Open and Fairfax is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Open Text Corp and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and Open Text 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 Open Text Corp 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 Open Text i.e., Open Text and Fairfax Financial go up and down completely randomly.
Pair Corralation between Open Text and Fairfax Financial
Assuming the 90 days trading horizon Open Text Corp is expected to under-perform the Fairfax Financial. In addition to that, Open Text is 1.33 times more volatile than Fairfax Financial Holdings. It trades about -0.14 of its total potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.25 per unit of volatility. If you would invest 174,999 in Fairfax Financial Holdings on August 29, 2024 and sell it today you would earn a total of 22,085 from holding Fairfax Financial Holdings or generate 12.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Open Text Corp vs. Fairfax Financial Holdings
Performance |
| Timeline |
| Open Text Corp |
| Fairfax Financial |
Open Text and Fairfax Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Open Text and Fairfax Financial
The main advantage of trading using opposite Open Text and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Open Text 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.| Open Text vs. NorthWest Healthcare Properties | Open Text vs. Faction Investment Group | Open Text vs. Partners Value Investments | Open Text vs. Nova Leap Health |
| 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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