Correlation Between Biglari Holdings and GM

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

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

Diversification Opportunities for Biglari Holdings and GM

0.22

Correlation Coefficient

Biglari Holdings  GM

Modest diversification

The 3 months correlation between Biglari and GM is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors 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 GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and GM go up and down completely randomly.

Pair Corralation between Biglari Holdings and GM

Allowing for the 90-day total investment horizon Biglari Holdings is expected to under-perform the GM. But the stock apears to be less risky and, when comparing its historical volatility, Biglari Holdings is 1.0 times less risky than GM. The stock trades about -0.14 of its potential returns per unit of risk. The General Motors is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  5,404  in General Motors on December 26, 2024 and sell it today you would lose (145.00) from holding General Motors or give up 2.68% of portfolio value over 90 days.

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

Biglari Holdings  vs.  General Motors

Biglari Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Biglari Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Biglari Holdings and GM

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

The idea behind Biglari Holdings and General Motors 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.