Correlation Between Fairfax Financial and Cohen Steers
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Cohen Steers 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 Cohen Steers 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 Cohen Steers Infrastructure, you can compare the effects of market volatilities on Fairfax Financial and Cohen Steers 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 Cohen Steers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Cohen Steers.
Diversification Opportunities for Fairfax Financial and Cohen Steers
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fairfax and Cohen is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Cohen Steers Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cohen Steers Infrast 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 Cohen Steers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cohen Steers Infrast has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Cohen Steers go up and down completely randomly.
Pair Corralation between Fairfax Financial and Cohen Steers
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 2.33 times more return on investment than Cohen Steers. However, Fairfax Financial is 2.33 times more volatile than Cohen Steers Infrastructure. It trades about 0.07 of its potential returns per unit of risk. Cohen Steers Infrastructure is currently generating about 0.03 per unit of risk. If you would invest 136,587 in Fairfax Financial Holdings on January 26, 2024 and sell it today you would earn a total of 11,138 from holding Fairfax Financial Holdings or generate 8.15% 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. Cohen Steers Infrastructure
Performance |
| Timeline |
| Fairfax Financial |
| Cohen Steers Infrast |
Fairfax Financial and Cohen Steers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Cohen Steers
The main advantage of trading using opposite Fairfax Financial and Cohen Steers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Cohen Steers 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 Cohen Steers will offset losses from the drop in Cohen Steers' long position.| Fairfax Financial vs. Element Fleet Management | Fairfax Financial vs. Martinrea International | Fairfax Financial vs. Mullen Group |
| Cohen Steers vs. Vanguard Total Stock | Cohen Steers vs. Vanguard 500 Index | Cohen Steers vs. Vanguard Total Stock | Cohen Steers vs. Vanguard Total Stock |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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