Correlation Between ISign Media and Fairfax Financial

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Can any of the company-specific risk be diversified away by investing in both ISign Media 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 ISign Media and Fairfax Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iSign Media Solutions and Fairfax Financial Holdings, you can compare the effects of market volatilities on ISign Media 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 ISign Media with a short position of Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ISign Media and Fairfax Financial.

Diversification Opportunities for ISign Media and Fairfax Financial

ISignFairfaxDiversified AwayISignFairfaxDiversified Away100%
-0.11
  Correlation Coefficient

Good diversification

The 3 months correlation between ISign and Fairfax is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding iSign Media Solutions and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and ISign Media 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 iSign Media Solutions 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 ISign Media i.e., ISign Media and Fairfax Financial go up and down completely randomly.

Pair Corralation between ISign Media and Fairfax Financial

Assuming the 90 days horizon ISign Media is expected to generate 1.63 times less return on investment than Fairfax Financial. But when comparing it to its historical volatility, iSign Media Solutions is 1.18 times less risky than Fairfax Financial. It trades about 0.08 of its potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,121  in Fairfax Financial Holdings on September 27, 2024 and sell it today you would earn a total of  244.00  from holding Fairfax Financial Holdings or generate 11.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.41%
ValuesDaily Returns

iSign Media Solutions  vs.  Fairfax Financial Holdings

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -4-202468
JavaScript chart by amCharts 3.21.15ISD FFH-PK
       Timeline  
iSign Media Solutions 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days iSign Media Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ISign Media is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
JavaScript chart by amCharts 3.21.15NovDecDec13.413.613.81414.214.4
Fairfax Financial 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, Fairfax Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec2222.52323.524

ISign Media and Fairfax Financial Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.7-2.02-1.34-0.670.01130.681.362.032.71 0.10.20.30.40.5
JavaScript chart by amCharts 3.21.15ISD FFH-PK
       Returns  

Pair Trading with ISign Media and Fairfax Financial

The main advantage of trading using opposite ISign Media and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ISign Media 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 iSign Media Solutions 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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