Correlation Between Biglari Holdings and Penn National

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

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

Diversification Opportunities for Biglari Holdings and Penn National

0.37

Correlation Coefficient

Biglari Holdings  Penn National

Weak diversification

The 3 months correlation between Biglari and Penn is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and Penn National Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penn National Gaming 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 Penn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penn National Gaming has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and Penn National go up and down completely randomly.

Pair Corralation between Biglari Holdings and Penn National

Allowing for the 90-day total investment horizon Biglari Holdings is expected to under-perform the Penn National. But the stock apears to be less risky and, when comparing its historical volatility, Biglari Holdings is 1.23 times less risky than Penn National. The stock trades about -0.12 of its potential returns per unit of risk. The Penn National Gaming is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,869  in Penn National Gaming on December 27, 2024 and sell it today you would lose (133.00) from holding Penn National Gaming or give up 7.12% 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.  Penn National Gaming

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 unsteady 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.

Penn National Gaming

Risk-Adjusted Performance

Very Weak

Over the last 90 days Penn National Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Penn National 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 Penn National

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

The idea behind Biglari Holdings and Penn National Gaming 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.