Correlation Between Fairfax Financial and Invesco High
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Invesco High 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 Invesco High 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 Invesco High Yield, you can compare the effects of market volatilities on Fairfax Financial and Invesco High 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 Invesco High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Invesco High.
Diversification Opportunities for Fairfax Financial and Invesco High
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fairfax and Invesco is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Invesco High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco High Yield 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 Invesco High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco High Yield has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Invesco High go up and down completely randomly.
Pair Corralation between Fairfax Financial and Invesco High
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 5.14 times more return on investment than Invesco High. However, Fairfax Financial is 5.14 times more volatile than Invesco High Yield. It trades about 0.06 of its potential returns per unit of risk. Invesco High Yield is currently generating about -0.29 per unit of risk. If you would invest 149,648 in Fairfax Financial Holdings on January 24, 2024 and sell it today you would earn a total of 1,731 from holding Fairfax Financial Holdings or generate 1.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Invesco High Yield
Performance |
| Timeline |
| Fairfax Financial |
| Invesco High Yield |
Fairfax Financial and Invesco High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Invesco High
The main advantage of trading using opposite Fairfax Financial and Invesco High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Invesco High 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 Invesco High will offset losses from the drop in Invesco High's long position.| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex Corp |
| Invesco High vs. Invesco Municipal Income | Invesco High vs. Invesco Municipal Income | Invesco High vs. Invesco Municipal Income | Invesco High vs. Oppenheimer Rising Dividends |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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