Correlation Between Pfizer and Fairfax Financial
Can any of the company-specific risk be diversified away by investing in both Pfizer 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 Pfizer and Fairfax Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pfizer Inc CDR and Fairfax Financial Holdings, you can compare the effects of market volatilities on Pfizer 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 Pfizer with a short position of Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and Fairfax Financial.
Diversification Opportunities for Pfizer and Fairfax Financial
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Pfizer and Fairfax is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc CDR and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and Pfizer 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 Pfizer Inc CDR 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 Pfizer i.e., Pfizer and Fairfax Financial go up and down completely randomly.
Pair Corralation between Pfizer and Fairfax Financial
Assuming the 90 days trading horizon Pfizer Inc CDR is expected to under-perform the Fairfax Financial. In addition to that, Pfizer is 2.38 times more volatile than Fairfax Financial Holdings. It trades about -0.02 of its total potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.17 per unit of volatility. If you would invest 1,814 in Fairfax Financial Holdings on October 25, 2024 and sell it today you would earn a total of 686.00 from holding Fairfax Financial Holdings or generate 37.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pfizer Inc CDR vs. Fairfax Financial Holdings
Performance |
| Timeline |
| Pfizer Inc CDR |
| Fairfax Financial |
Pfizer and Fairfax Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pfizer and Fairfax Financial
The main advantage of trading using opposite Pfizer and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer 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.| Pfizer vs. Oncolytics Biotech | Pfizer vs. Sparx Technology | Pfizer vs. Titanium Transportation Group | Pfizer vs. Evertz Technologies Limited |
| Fairfax Financial vs. Verizon Communications CDR | Fairfax Financial vs. Brookfield Office Properties | Fairfax Financial vs. Pollard Banknote Limited | Fairfax Financial vs. Advent Wireless |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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