Correlation Between Biglari Holdings and Flanigans Enterprises

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

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

Diversification Opportunities for Biglari Holdings and Flanigans Enterprises

-0.61

Correlation Coefficient

Biglari Holdings  Flanigans Enterprises

Excellent diversification

The 3 months correlation between Biglari and Flanigans is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and Flanigans Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flanigans Enterprises and Biglari Holdings 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 Biglari Holdings are associated (or correlated) with Flanigans Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flanigans Enterprises has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and Flanigans Enterprises go up and down completely randomly.

Pair Corralation between Biglari Holdings and Flanigans Enterprises

Given the investment horizon of 90 days Biglari Holdings is expected to generate 2.07 times more return on investment than Flanigans Enterprises. However, Biglari Holdings is 2.07 times more volatile than Flanigans Enterprises. It trades about 0.09 of its potential returns per unit of risk. Flanigans Enterprises is currently generating about 0.04 per unit of risk. If you would invest  70,400  in Biglari Holdings on September 28, 2024 and sell it today you would earn a total of  56,432  from holding Biglari Holdings or generate 80.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	92.41%
Values	Daily Returns

Biglari Holdings  vs.  Flanigans Enterprises

Biglari Holdings

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Biglari Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Flanigans Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flanigans Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Flanigans Enterprises is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Biglari Holdings and Flanigans Enterprises

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

The idea behind Biglari Holdings and Flanigans Enterprises 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.