Correlation Between Fairfax Financial and Orogen Royalties

Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Orogen Royalties 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 Orogen Royalties 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 Orogen Royalties, you can compare the effects of market volatilities on Fairfax Financial and Orogen Royalties 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 Orogen Royalties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Orogen Royalties.

Diversification Opportunities for Fairfax Financial and Orogen Royalties

-0.68

Correlation Coefficient

Fairfax Financial  Orogen Royalties

Excellent diversification

The 3 months correlation between Fairfax and Orogen is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Orogen Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orogen Royalties 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 Orogen Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orogen Royalties has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Orogen Royalties go up and down completely randomly.

Pair Corralation between Fairfax Financial and Orogen Royalties

Assuming the 90 days trading horizon Fairfax Financial is expected to generate 1.13 times less return on investment than Orogen Royalties. But when comparing it to its historical volatility, Fairfax Financial Holdings is 1.92 times less risky than Orogen Royalties. It trades about 0.13 of its potential returns per unit of risk. Orogen Royalties is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  52.00  in Orogen Royalties on September 14, 2024 and sell it today you would earn a total of  78.00  from holding Orogen Royalties or generate 150.0% return on investment over 90 days.

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

Fairfax Financial Holdings  vs.  Orogen Royalties

Fairfax Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Fairfax Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Orogen Royalties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orogen Royalties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Fairfax Financial and Orogen Royalties

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

The idea behind Fairfax Financial Holdings and Orogen Royalties 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.