Correlation Between Fairfax Fin and Gatekeeper Systems

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

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

Diversification Opportunities for Fairfax Fin and Gatekeeper Systems

0.61

Correlation Coefficient

Fairfax Fin  Gatekeeper Systems

Poor diversification

The 3 months correlation between Fairfax and Gatekeeper is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Fin Hld and Gatekeeper Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gatekeeper Systems and Fairfax Fin 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 Fairfax Fin Hld are associated (or correlated) with Gatekeeper Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gatekeeper Systems has no effect on the direction of Fairfax Fin i.e., Fairfax Fin and Gatekeeper Systems go up and down completely randomly.

Pair Corralation between Fairfax Fin and Gatekeeper Systems

Assuming the 90 days trading horizon Fairfax Fin is expected to generate 1.26 times less return on investment than Gatekeeper Systems. But when comparing it to its historical volatility, Fairfax Fin Hld is 2.88 times less risky than Gatekeeper Systems. It trades about 0.19 of its potential returns per unit of risk. Gatekeeper Systems is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  62.00  in Gatekeeper Systems on September 16, 2024 and sell it today you would earn a total of  8.00  from holding Gatekeeper Systems or generate 12.9% return on investment over 90 days.

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

Fairfax Fin Hld  vs.  Gatekeeper Systems

Fairfax Fin Hld

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Fin Hld are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical indicators, Fairfax Fin may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gatekeeper Systems

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gatekeeper Systems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Gatekeeper Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fairfax Fin and Gatekeeper Systems

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

The idea behind Fairfax Fin Hld and Gatekeeper Systems 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.