Correlation Between Royal Bank and Fairfax Financial
Can any of the company-specific risk be diversified away by investing in both Royal Bank 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 Royal Bank and Fairfax Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Bank of and Fairfax Financial Holdings, you can compare the effects of market volatilities on Royal Bank 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 Royal Bank with a short position of Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Fairfax Financial.
Diversification Opportunities for Royal Bank and Fairfax Financial
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Royal and Fairfax is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and Royal Bank 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 Royal Bank of 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 Royal Bank i.e., Royal Bank and Fairfax Financial go up and down completely randomly.
Pair Corralation between Royal Bank and Fairfax Financial
Assuming the 90 days trading horizon Royal Bank is expected to generate 6.45 times less return on investment than Fairfax Financial. But when comparing it to its historical volatility, Royal Bank of is 5.15 times less risky than Fairfax Financial. It trades about 0.24 of its potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 2,226 in Fairfax Financial Holdings on September 3, 2024 and sell it today you would earn a total of 174.00 from holding Fairfax Financial Holdings or generate 7.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Bank of vs. Fairfax Financial Holdings
Performance |
| Timeline |
| Royal Bank |
| Fairfax Financial |
Royal Bank and Fairfax Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Fairfax Financial
The main advantage of trading using opposite Royal Bank and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank 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.| Royal Bank vs. iSign Media Solutions | Royal Bank vs. Dream Office Real | Royal Bank vs. WELL Health Technologies | Royal Bank vs. Postmedia Network Canada |
| 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device |