Correlation Between Biglari Holdings and Portillos

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

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

Diversification Opportunities for Biglari Holdings and Portillos

-0.73

Correlation Coefficient

Biglari Holdings  Portillos

Pay attention - limited upside

The 3 months correlation between Biglari and Portillos is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and Portillos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portillos 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 Portillos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portillos has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and Portillos go up and down completely randomly.

Pair Corralation between Biglari Holdings and Portillos

Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 0.89 times more return on investment than Portillos. However, Biglari Holdings is 1.12 times less risky than Portillos. It trades about 0.2 of its potential returns per unit of risk. Portillos is currently generating about -0.04 per unit of risk. If you would invest  17,125  in Biglari Holdings on September 4, 2024 and sell it today you would earn a total of  5,275  from holding Biglari Holdings or generate 30.8% return on investment over 90 days.

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

Biglari Holdings  vs.  Portillos

Biglari Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Biglari Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Portillos

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Biglari Holdings and Portillos 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.