Correlation Between Wilmington Capital and Fairfax Financial

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

Diversification Opportunities for Wilmington Capital and Fairfax Financial

-0.1
  Correlation Coefficient

Good diversification

The 3 months correlation between Wilmington and Fairfax is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Wilmington Capital Management and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial and Wilmington Capital 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 Wilmington Capital Management 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 Wilmington Capital i.e., Wilmington Capital and Fairfax Financial go up and down completely randomly.

Pair Corralation between Wilmington Capital and Fairfax Financial

Assuming the 90 days trading horizon Wilmington Capital Management is expected to under-perform the Fairfax Financial. In addition to that, Wilmington Capital is 7.2 times more volatile than Fairfax Financial Holdings. It trades about -0.03 of its total potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.38 per unit of volatility. If you would invest  2,119  in Fairfax Financial Holdings on April 22, 2024 and sell it today you would earn a total of  128.00  from holding Fairfax Financial Holdings or generate 6.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.24%
ValuesDaily Returns

Wilmington Capital Management  vs.  Fairfax Financial Holdings

 Performance 
       Timeline  
Wilmington Capital 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Wilmington Capital Management are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Wilmington Capital may actually be approaching a critical reversion point that can send shares even higher in August 2024.
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 basic indicators, Fairfax Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Wilmington Capital and Fairfax Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Wilmington Capital and Fairfax Financial

The main advantage of trading using opposite Wilmington Capital and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wilmington Capital 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 Wilmington Capital Management 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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