Correlation Between Bip Investment and Fairfax Financial

Can any of the company-specific risk be diversified away by investing in both Bip Investment 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 Bip Investment and Fairfax Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bip Investment Corp and Fairfax Financial Holdings, you can compare the effects of market volatilities on Bip Investment 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 Bip Investment with a short position of Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bip Investment and Fairfax Financial.

Diversification Opportunities for Bip Investment and Fairfax Financial

0.41

Correlation Coefficient

Bip Investment  Fairfax Financial

Very weak diversification

The 3 months correlation between Bip and Fairfax is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Bip Investment Corp and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and Bip Investment 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 Bip Investment Corp 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 Bip Investment i.e., Bip Investment and Fairfax Financial go up and down completely randomly.

Pair Corralation between Bip Investment and Fairfax Financial

Assuming the 90 days trading horizon Bip Investment Corp is expected to under-perform the Fairfax Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, Bip Investment Corp is 1.81 times less risky than Fairfax Financial. The preferred stock trades about -0.02 of its potential returns per unit of risk. The Fairfax Financial Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,229  in Fairfax Financial Holdings on September 26, 2024 and sell it today you would earn a total of  136.00  from holding Fairfax Financial Holdings or generate 6.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Bip Investment Corp  vs.  Fairfax Financial Holdings

Bip Investment Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bip Investment Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Bip Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fairfax Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Fairfax Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bip Investment and Fairfax Financial

The main advantage of trading using opposite Bip Investment and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bip Investment 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.

The idea behind Bip Investment Corp and Fairfax Financial Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.