Correlation Between Biglari Holdings and China Power

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

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

Diversification Opportunities for Biglari Holdings and China Power

0.0

Correlation Coefficient

Biglari Holdings  China Power

Pay attention - limited upside

The 3 months correlation between Biglari and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and China Power Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Power Equipment 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 China Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Power Equipment has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and China Power go up and down completely randomly.

Pair Corralation between Biglari Holdings and China Power

If you would invest  23,079  in Biglari Holdings on October 12, 2024 and sell it today you would lose (268.00) from holding Biglari Holdings or give up 1.16% of portfolio value over 90 days.

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

Biglari Holdings  vs.  China Power Equipment

Biglari Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 14 (%) 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.

China Power Equipment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Power Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, China Power is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Biglari Holdings and China Power

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

The idea behind Biglari Holdings and China Power Equipment 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.