Correlation Between Biglari Holdings and Yuexiu Transport

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

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

Diversification Opportunities for Biglari Holdings and Yuexiu Transport

0.79

Correlation Coefficient

Biglari Holdings  Yuexiu Transport

Poor diversification

The 3 months correlation between Biglari and Yuexiu is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and Yuexiu Transport Infrastructur in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuexiu Transport Inf 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 Yuexiu Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuexiu Transport Inf has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and Yuexiu Transport go up and down completely randomly.

Pair Corralation between Biglari Holdings and Yuexiu Transport

Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 2.61 times less return on investment than Yuexiu Transport. But when comparing it to its historical volatility, Biglari Holdings is 1.37 times less risky than Yuexiu Transport. It trades about 0.06 of its potential returns per unit of risk. Yuexiu Transport Infrastructure is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  32.00  in Yuexiu Transport Infrastructure on September 24, 2024 and sell it today you would earn a total of  26.00  from holding Yuexiu Transport Infrastructure or generate 81.25% return on investment over 90 days.

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

Biglari Holdings  vs.  Yuexiu Transport Infrastructur

Biglari Holdings

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 19 (%) 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.

Yuexiu Transport Inf

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yuexiu Transport Infrastructure are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Yuexiu Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biglari Holdings and Yuexiu Transport

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

The idea behind Biglari Holdings and Yuexiu Transport Infrastructure 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.