Correlation Between Biglari Holdings and Life Time

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

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

Diversification Opportunities for Biglari Holdings and Life Time

-0.49

Correlation Coefficient

Biglari Holdings  Life Time

Very good diversification

The 3 months correlation between Biglari and Life is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and Life Time Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Time Group 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 Life Time. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Time Group has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and Life Time go up and down completely randomly.

Pair Corralation between Biglari Holdings and Life Time

Allowing for the 90-day total investment horizon Biglari Holdings is expected to under-perform the Life Time. In addition to that, Biglari Holdings is 1.39 times more volatile than Life Time Group. It trades about -0.31 of its total potential returns per unit of risk. Life Time Group is currently generating about 0.79 per unit of volatility. If you would invest  2,196  in Life Time Group on October 23, 2024 and sell it today you would earn a total of  634.00  from holding Life Time Group or generate 28.87% return on investment over 90 days.

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

Biglari Holdings  vs.  Life Time Group

Biglari Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 12 (%) 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.

Life Time Group

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Life Time Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, Life Time demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biglari Holdings and Life Time

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

The idea behind Biglari Holdings and Life Time Group 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.