Correlation Between Biglari Holdings and Cebu Air

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

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

Diversification Opportunities for Biglari Holdings and Cebu Air

-0.8

Correlation Coefficient

Biglari Holdings  Cebu Air

Pay attention - limited upside

The 3 months correlation between Biglari and Cebu is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and Cebu Air ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air ADR 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 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 ADR has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and Cebu Air go up and down completely randomly.

Pair Corralation between Biglari Holdings and Cebu Air

If you would invest  20,641  in Biglari Holdings on September 23, 2024 and sell it today you would earn a total of  4,427  from holding Biglari Holdings or generate 21.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Biglari Holdings  vs.  Cebu Air ADR

Biglari Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical indicators, Biglari Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Cebu Air ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cebu Air ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Biglari Holdings and Cebu Air

The main advantage of trading using opposite Biglari Holdings and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biglari Holdings 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 Biglari Holdings and Cebu Air ADR 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 Anywhere module to track or share privately all of your investments from the convenience of any device.