Correlation Between Biglari Holdings and KVH Industries

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

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

Diversification Opportunities for Biglari Holdings and KVH Industries

0.83

Correlation Coefficient

Biglari Holdings  KVH Industries

Very poor diversification

The 3 months correlation between Biglari and KVH is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and KVH Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KVH Industries 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 KVH Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KVH Industries has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and KVH Industries go up and down completely randomly.

Pair Corralation between Biglari Holdings and KVH Industries

Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 1.62 times more return on investment than KVH Industries. However, Biglari Holdings is 1.62 times more volatile than KVH Industries. It trades about 0.01 of its potential returns per unit of risk. KVH Industries is currently generating about -0.05 per unit of risk. If you would invest  22,860  in Biglari Holdings on October 11, 2024 and sell it today you would lose (49.00) from holding Biglari Holdings or give up 0.21% of portfolio value over 90 days.

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

Biglari Holdings  vs.  KVH Industries

Biglari Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 13 (%) 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.

KVH Industries

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KVH Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, KVH Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biglari Holdings and KVH Industries

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

The idea behind Biglari Holdings and KVH Industries 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..