Correlation Between Biglari Holdings and CF Industries

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

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

Diversification Opportunities for Biglari Holdings and CF Industries

0.45

Correlation Coefficient

Biglari Holdings  CF Industries

Very weak diversification

The 3 months correlation between Biglari and CF Industries is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and CF Industries Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Industries Holdings 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 CF Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Industries Holdings has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and CF Industries go up and down completely randomly.

Pair Corralation between Biglari Holdings and CF Industries

Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 2.0 times more return on investment than CF Industries. However, Biglari Holdings is 2.0 times more volatile than CF Industries Holdings. It trades about 0.38 of its potential returns per unit of risk. CF Industries Holdings is currently generating about -0.06 per unit of risk. If you would invest  20,698  in Biglari Holdings on September 26, 2024 and sell it today you would earn a total of  5,757  from holding Biglari Holdings or generate 27.81% 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.  CF Industries Holdings

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 fairly unsteady technical indicators, Biglari Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

CF Industries Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, CF Industries is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Biglari Holdings and CF Industries

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

The idea behind Biglari Holdings and CF Industries 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.

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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.