Correlation Between Molson Coors and Fairfax Financial
Can any of the company-specific risk be diversified away by investing in both Molson Coors 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 Molson Coors and Fairfax Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Molson Coors Canada and Fairfax Financial Holdings, you can compare the effects of market volatilities on Molson Coors 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 Molson Coors with a short position of Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Molson Coors and Fairfax Financial.
Diversification Opportunities for Molson Coors and Fairfax Financial
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Molson and Fairfax is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Molson Coors Canada and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and Molson Coors 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 Molson Coors Canada 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 Molson Coors i.e., Molson Coors and Fairfax Financial go up and down completely randomly.
Pair Corralation between Molson Coors and Fairfax Financial
Assuming the 90 days trading horizon Molson Coors Canada is expected to generate 4.44 times more return on investment than Fairfax Financial. However, Molson Coors is 4.44 times more volatile than Fairfax Financial Holdings. It trades about 0.34 of its potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.38 per unit of risk. If you would invest 7,751 in Molson Coors Canada on August 31, 2024 and sell it today you would earn a total of 949.00 from holding Molson Coors Canada or generate 12.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 81.82% |
| Values | Daily Returns |
Molson Coors Canada vs. Fairfax Financial Holdings
Performance |
| Timeline |
| Molson Coors Canada |
| Fairfax Financial |
Molson Coors and Fairfax Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Molson Coors and Fairfax Financial
The main advantage of trading using opposite Molson Coors and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Molson Coors 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.| Molson Coors vs. Maple Leaf Foods | Molson Coors vs. Saputo Inc | Molson Coors vs. Forstrong Global Income | Molson Coors vs. iShares Canadian HYBrid |
| Fairfax Financial vs. Fairfax Financial Holdings | Fairfax Financial vs. iShares Canadian HYBrid | Fairfax Financial vs. Brompton European Dividend | Fairfax Financial vs. Solar Alliance Energy |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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