Correlation Between Biglari Holdings and Chemtrade Logistics

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

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

Diversification Opportunities for Biglari Holdings and Chemtrade Logistics

-0.36

Correlation Coefficient

Biglari Holdings  Chemtrade Logistics

Very good diversification

The 3 months correlation between Biglari and Chemtrade is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and Chemtrade Logistics Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemtrade Logistics 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 Chemtrade Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemtrade Logistics has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and Chemtrade Logistics go up and down completely randomly.

Pair Corralation between Biglari Holdings and Chemtrade Logistics

Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 2.04 times more return on investment than Chemtrade Logistics. However, Biglari Holdings is 2.04 times more volatile than Chemtrade Logistics Income. It trades about 0.26 of its potential returns per unit of risk. Chemtrade Logistics Income is currently generating about -0.08 per unit of risk. If you would invest  18,060  in Biglari Holdings on October 9, 2024 and sell it today you would earn a total of  6,757  from holding Biglari Holdings or generate 37.41% return on investment over 90 days.

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

Biglari Holdings  vs.  Chemtrade Logistics Income

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

Chemtrade Logistics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemtrade Logistics Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Biglari Holdings and Chemtrade Logistics

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

The idea behind Biglari Holdings and Chemtrade Logistics Income 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.