Correlation Between Fairfax Financial and Cebu Air

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

Diversification Opportunities for Fairfax Financial and Cebu Air

0.0

Correlation Coefficient

Fairfax Financial  Cebu Air

Pay attention - limited upside

The 3 months correlation between Fairfax and Cebu is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Cebu Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air 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 Cebu Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cebu Air has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Cebu Air go up and down completely randomly.

Pair Corralation between Fairfax Financial and Cebu Air

If you would invest  1.20  in Cebu Air on July 21, 2024 and sell it today you would earn a total of  0.00  from holding Cebu Air or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Fairfax Financial Holdings  vs.  Cebu Air

Fairfax Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fairfax Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Cebu Air

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cebu Air has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cebu Air is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fairfax Financial and Cebu Air

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

The idea behind Fairfax Financial Holdings and Cebu Air 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.