Correlation Between Fairfax Financial and LithiumBank Resources
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and LithiumBank Resources 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 Financial and LithiumBank Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fairfax Financial Holdings and LithiumBank Resources Corp, you can compare the effects of market volatilities on Fairfax Financial and LithiumBank Resources 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 Financial with a short position of LithiumBank Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and LithiumBank Resources.
Diversification Opportunities for Fairfax Financial and LithiumBank Resources
-0.94 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Fairfax and LithiumBank is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and LithiumBank Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LithiumBank Resources and Fairfax Financial 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 Financial Holdings are associated (or correlated) with LithiumBank Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LithiumBank Resources has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and LithiumBank Resources go up and down completely randomly.
Pair Corralation between Fairfax Financial and LithiumBank Resources
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 0.36 times more return on investment than LithiumBank Resources. However, Fairfax Financial Holdings is 2.8 times less risky than LithiumBank Resources. It trades about 0.18 of its potential returns per unit of risk. LithiumBank Resources Corp is currently generating about -0.16 per unit of risk. If you would invest 167,924 in Fairfax Financial Holdings on September 25, 2024 and sell it today you would earn a total of 32,377 from holding Fairfax Financial Holdings or generate 19.28% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Fairfax Financial Holdings vs. LithiumBank Resources Corp
Performance |
Timeline |
Fairfax Financial |
LithiumBank Resources |
Fairfax Financial and LithiumBank Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Fairfax Financial and LithiumBank Resources
The main advantage of trading using opposite Fairfax Financial and LithiumBank Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, LithiumBank Resources 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 LithiumBank Resources will offset losses from the drop in LithiumBank Resources' long position.Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex Corp |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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