Correlation Between Biglari Holdings and Nio

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

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

Diversification Opportunities for Biglari Holdings and Nio

-0.49

Correlation Coefficient

Biglari Holdings  Nio

Very good diversification

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

Pair Corralation between Biglari Holdings and Nio

Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 0.43 times more return on investment than Nio. However, Biglari Holdings is 2.34 times less risky than Nio. It trades about 0.14 of its potential returns per unit of risk. Nio Class A is currently generating about 0.05 per unit of risk. If you would invest  17,899  in Biglari Holdings on August 30, 2024 and sell it today you would earn a total of  3,601  from holding Biglari Holdings or generate 20.12% 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.  Nio Class A

Biglari Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 11 (%) 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.

Nio Class A

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nio Class A are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Nio displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biglari Holdings and Nio

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

The idea behind Biglari Holdings and Nio Class A 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.