Correlation Between Cogeco Communications and Fairfax Fin

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

By analyzing existing cross correlation between Cogeco Communications and Fairfax Fin Hld, you can compare the effects of market volatilities on Cogeco Communications and Fairfax Fin 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 Cogeco Communications with a short position of Fairfax Fin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogeco Communications and Fairfax Fin.

Diversification Opportunities for Cogeco Communications and Fairfax Fin

0.35

Correlation Coefficient

Cogeco Communications  Fairfax Fin

Weak diversification

The 3 months correlation between Cogeco and Fairfax is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Cogeco Communications and Fairfax Fin Hld in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Fin Hld and Cogeco Communications 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 Cogeco Communications are associated (or correlated) with Fairfax Fin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairfax Fin Hld has no effect on the direction of Cogeco Communications i.e., Cogeco Communications and Fairfax Fin go up and down completely randomly.

Pair Corralation between Cogeco Communications and Fairfax Fin

Assuming the 90 days trading horizon Cogeco Communications is expected to under-perform the Fairfax Fin. In addition to that, Cogeco Communications is 1.47 times more volatile than Fairfax Fin Hld. It trades about -0.07 of its total potential returns per unit of risk. Fairfax Fin Hld is currently generating about 0.19 per unit of volatility. If you would invest  2,380  in Fairfax Fin Hld on September 19, 2024 and sell it today you would earn a total of  116.00  from holding Fairfax Fin Hld or generate 4.87% return on investment over 90 days.

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

Cogeco Communications  vs.  Fairfax Fin Hld

Cogeco Communications

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Cogeco Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Cogeco Communications is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Fairfax Fin Hld

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Fin Hld are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal technical indicators, Fairfax Fin may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cogeco Communications and Fairfax Fin

The main advantage of trading using opposite Cogeco Communications and Fairfax Fin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogeco Communications position performs unexpectedly, Fairfax Fin 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 Fin will offset losses from the drop in Fairfax Fin's long position.

The idea behind Cogeco Communications and Fairfax Fin Hld 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.