Correlation Between Fairfax Financial and Hartford Financial

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

Diversification Opportunities for Fairfax Financial and Hartford Financial

0.64

Correlation Coefficient

Fairfax Financial  Hartford Financial

Poor diversification

The 3 months correlation between Fairfax and Hartford is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Hartford Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Financial 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 Hartford Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Financial has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Hartford Financial go up and down completely randomly.

Pair Corralation between Fairfax Financial and Hartford Financial

If you would invest  100,635  in Fairfax Financial Holdings on January 30, 2024 and sell it today you would earn a total of  0.00  from holding Fairfax Financial Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.55%
Values	Daily Returns

Fairfax Financial Holdings  vs.  Hartford Financial Services

Fairfax Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fairfax Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hartford Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hartford Financial Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent forward indicators, Hartford Financial may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Fairfax Financial and Hartford Financial

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

The idea behind Fairfax Financial Holdings and Hartford Financial Services 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.