Correlation Between Root and Fairfax Financial
Can any of the company-specific risk be diversified away by investing in both Root 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 Root and Fairfax Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Root Inc and Fairfax Financial Holdings, you can compare the effects of market volatilities on Root 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 Root with a short position of Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Root and Fairfax Financial.
Diversification Opportunities for Root and Fairfax Financial
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Root and Fairfax is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Root Inc and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and Root 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 Root Inc 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 Root i.e., Root and Fairfax Financial go up and down completely randomly.
Pair Corralation between Root and Fairfax Financial
Given the investment horizon of 90 days Root Inc is expected to generate 26.54 times more return on investment than Fairfax Financial. However, Root is 26.54 times more volatile than Fairfax Financial Holdings. It trades about 0.07 of its potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.22 per unit of risk. If you would invest 7,499 in Root Inc on September 13, 2024 and sell it today you would earn a total of 409.00 from holding Root Inc or generate 5.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Root Inc vs. Fairfax Financial Holdings
Performance |
| Timeline |
| Root Inc |
| Fairfax Financial |
Root and Fairfax Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Root and Fairfax Financial
The main advantage of trading using opposite Root and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Root 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.| Root vs. Selective Insurance Group | Root vs. Donegal Group B | Root vs. Horace Mann Educators | Root vs. Global Indemnity PLC |
| Fairfax Financial vs. Root Inc | Fairfax Financial vs. Bank of America | Fairfax Financial vs. Aerovate Therapeutics | Fairfax Financial vs. SoundHound AI |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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