Correlation Between Fairfax Financial and Mfs Emerging
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Mfs Emerging 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 Mfs Emerging 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 Mfs Emerging Markets, you can compare the effects of market volatilities on Fairfax Financial and Mfs Emerging 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 Mfs Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Mfs Emerging.
Diversification Opportunities for Fairfax Financial and Mfs Emerging
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fairfax and Mfs is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Mfs Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Emerging Markets 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 Mfs Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Emerging Markets has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Mfs Emerging go up and down completely randomly.
Pair Corralation between Fairfax Financial and Mfs Emerging
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 2.61 times more return on investment than Mfs Emerging. However, Fairfax Financial is 2.61 times more volatile than Mfs Emerging Markets. It trades about 0.12 of its potential returns per unit of risk. Mfs Emerging Markets is currently generating about -0.18 per unit of risk. If you would invest 141,000 in Fairfax Financial Holdings on January 24, 2024 and sell it today you would earn a total of 7,200 from holding Fairfax Financial Holdings or generate 5.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Mfs Emerging Markets
Performance |
| Timeline |
| Fairfax Financial |
| Mfs Emerging Markets |
Fairfax Financial and Mfs Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Mfs Emerging
The main advantage of trading using opposite Fairfax Financial and Mfs Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Mfs Emerging 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 Mfs Emerging will offset losses from the drop in Mfs Emerging's long position.| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex Corp |
| Mfs Emerging vs. Mfs Prudent Investor | Mfs Emerging vs. Mfs Prudent Investor | Mfs Emerging vs. Mfs Prudent Investor | Mfs Emerging vs. Mfs Prudent Investor |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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