Correlation Between Canso Credit and Fairfax Financial
Can any of the company-specific risk be diversified away by investing in both Canso Credit 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 Canso Credit and Fairfax Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canso Credit Trust and Fairfax Financial Holdings, you can compare the effects of market volatilities on Canso Credit 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 Canso Credit with a short position of Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canso Credit and Fairfax Financial.
Diversification Opportunities for Canso Credit and Fairfax Financial
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Canso and Fairfax is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Canso Credit Trust and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and Canso Credit 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 Canso Credit Trust 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 Canso Credit i.e., Canso Credit and Fairfax Financial go up and down completely randomly.
Pair Corralation between Canso Credit and Fairfax Financial
Assuming the 90 days trading horizon Canso Credit is expected to generate 1.29 times less return on investment than Fairfax Financial. But when comparing it to its historical volatility, Canso Credit Trust is 3.78 times less risky than Fairfax Financial. It trades about 0.37 of its potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,130 in Fairfax Financial Holdings on September 25, 2024 and sell it today you would earn a total of 70.00 from holding Fairfax Financial Holdings or generate 3.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canso Credit Trust vs. Fairfax Financial Holdings
Performance |
| Timeline |
| Canso Credit Trust |
| Fairfax Financial |
Canso Credit and Fairfax Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canso Credit and Fairfax Financial
The main advantage of trading using opposite Canso Credit and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canso Credit 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.| Canso Credit vs. Orca Energy Group | Canso Credit vs. Rogers Communications | Canso Credit vs. Aclara Resources | Canso Credit vs. Buhler Industries |
| Fairfax Financial vs. Ocumetics Technology Corp | Fairfax Financial vs. Guru Organic Energy | Fairfax Financial vs. High Liner Foods | Fairfax Financial vs. Xtract One Technologies |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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