Correlation Between Biglari Holdings and WisdomTree Japan

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

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

Diversification Opportunities for Biglari Holdings and WisdomTree Japan

0.21

Correlation Coefficient

Biglari Holdings  WisdomTree Japan

Modest diversification

The 3 months correlation between Biglari and WisdomTree is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and WisdomTree Japan SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Japan SmallCap 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 WisdomTree Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Japan SmallCap has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and WisdomTree Japan go up and down completely randomly.

Pair Corralation between Biglari Holdings and WisdomTree Japan

Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 2.41 times more return on investment than WisdomTree Japan. However, Biglari Holdings is 2.41 times more volatile than WisdomTree Japan SmallCap. It trades about 0.04 of its potential returns per unit of risk. WisdomTree Japan SmallCap is currently generating about 0.06 per unit of risk. If you would invest  17,414  in Biglari Holdings on December 4, 2024 and sell it today you would earn a total of  5,409  from holding Biglari Holdings or generate 31.06% return on investment over 90 days.

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

Biglari Holdings  vs.  WisdomTree Japan SmallCap

Biglari Holdings

Risk-Adjusted Performance

Weak

Over the last 90 days Biglari Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Biglari Holdings is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

WisdomTree Japan SmallCap

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Japan SmallCap are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady technical and fundamental indicators, WisdomTree Japan is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Biglari Holdings and WisdomTree Japan

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

The idea behind Biglari Holdings and WisdomTree Japan SmallCap 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..