Correlation Between AW Revenue and Biglari Holdings

Can any of the company-specific risk be diversified away by investing in both AW Revenue and Biglari Holdings 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 AW Revenue and Biglari Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AW Revenue Royalties and Biglari Holdings, you can compare the effects of market volatilities on AW Revenue and Biglari Holdings 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 AW Revenue with a short position of Biglari Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of AW Revenue and Biglari Holdings.

Diversification Opportunities for AW Revenue and Biglari Holdings

0.0

Correlation Coefficient

AW Revenue  Biglari Holdings

Pay attention - limited upside

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

Pair Corralation between AW Revenue and Biglari Holdings

Assuming the 90 days horizon AW Revenue Royalties is expected to generate 1.93 times more return on investment than Biglari Holdings. However, AW Revenue is 1.93 times more volatile than Biglari Holdings. It trades about 0.02 of its potential returns per unit of risk. Biglari Holdings is currently generating about 0.04 per unit of risk. If you would invest  2,699  in AW Revenue Royalties on October 23, 2024 and sell it today you would lose (23.00) from holding AW Revenue Royalties or give up 0.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	58.7%
Values	Daily Returns

AW Revenue Royalties  vs.  Biglari Holdings

AW Revenue Royalties

Risk-Adjusted Performance

0 of 100

Very Weak

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

Biglari Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical indicators, Biglari Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AW Revenue and Biglari Holdings

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

The idea behind AW Revenue Royalties and Biglari 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.