Correlation Between Biglari Holdings and Delek Drilling

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

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

Diversification Opportunities for Biglari Holdings and Delek Drilling

0.84

Correlation Coefficient

Biglari Holdings  Delek Drilling

Very poor diversification

The 3 months correlation between Biglari and Delek is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and Delek Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delek Drilling 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 Delek Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delek Drilling has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and Delek Drilling go up and down completely randomly.

Pair Corralation between Biglari Holdings and Delek Drilling

Allowing for the 90-day total investment horizon Biglari Holdings is expected to under-perform the Delek Drilling. In addition to that, Biglari Holdings is 3.15 times more volatile than Delek Drilling . It trades about -0.06 of its total potential returns per unit of risk. Delek Drilling is currently generating about 0.28 per unit of volatility. If you would invest  305.00  in Delek Drilling on October 12, 2024 and sell it today you would earn a total of  22.00  from holding Delek Drilling or generate 7.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Biglari Holdings  vs.  Delek Drilling

Biglari Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 11 (%) 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.

Delek Drilling

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Drilling are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Delek Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biglari Holdings and Delek Drilling

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

The idea behind Biglari Holdings and Delek Drilling 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.