Correlation Between Biglari Holdings and Blue Moon

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

By analyzing existing cross correlation between Biglari Holdings and Blue Moon Metals, you can compare the effects of market volatilities on Biglari Holdings and Blue Moon 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 Blue Moon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biglari Holdings and Blue Moon.

Diversification Opportunities for Biglari Holdings and Blue Moon

0.43

Correlation Coefficient

Biglari Holdings  Blue Moon

Very weak diversification

The 3 months correlation between Biglari and Blue is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and Blue Moon Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Moon Metals 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 Blue Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Moon Metals has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and Blue Moon go up and down completely randomly.

Pair Corralation between Biglari Holdings and Blue Moon

Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 14.45 times less return on investment than Blue Moon. But when comparing it to its historical volatility, Biglari Holdings is 6.83 times less risky than Blue Moon. It trades about 0.06 of its potential returns per unit of risk. Blue Moon Metals is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2.97  in Blue Moon Metals on September 24, 2024 and sell it today you would earn a total of  22.03  from holding Blue Moon Metals or generate 741.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Biglari Holdings  vs.  Blue Moon Metals

Biglari Holdings

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 19 (%) 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.

Blue Moon Metals

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Moon Metals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Blue Moon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biglari Holdings and Blue Moon

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

The idea behind Biglari Holdings and Blue Moon Metals 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.