Correlation Between Biglari Holdings and Smart Share

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

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

Diversification Opportunities for Biglari Holdings and Smart Share

0.16

Correlation Coefficient

Biglari Holdings  Smart Share

Average diversification

The 3 months correlation between Biglari and Smart is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and Smart Share Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Share Global 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 Smart Share. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Share Global has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and Smart Share go up and down completely randomly.

Pair Corralation between Biglari Holdings and Smart Share

Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 1.07 times more return on investment than Smart Share. However, Biglari Holdings is 1.07 times more volatile than Smart Share Global. It trades about 0.38 of its potential returns per unit of risk. Smart Share Global is currently generating about 0.04 per unit of risk. If you would invest  20,686  in Biglari Holdings on September 27, 2024 and sell it today you would earn a total of  5,892  from holding Biglari Holdings or generate 28.48% return on investment over 90 days.

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

Biglari Holdings  vs.  Smart Share Global

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.

Smart Share Global

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Smart Share Global are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Smart Share may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Biglari Holdings and Smart Share

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

The idea behind Biglari Holdings and Smart Share Global 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.