Correlation Between Biglari Holdings and Prestige Wealth

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

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

Diversification Opportunities for Biglari Holdings and Prestige Wealth

0.61

Correlation Coefficient

Biglari Holdings  Prestige Wealth

Poor diversification

The 3 months correlation between Biglari and Prestige is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and Prestige Wealth Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prestige Wealth Ordinary 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 Prestige Wealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prestige Wealth Ordinary has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and Prestige Wealth go up and down completely randomly.

Pair Corralation between Biglari Holdings and Prestige Wealth

Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 3.17 times less return on investment than Prestige Wealth. But when comparing it to its historical volatility, Biglari Holdings is 4.66 times less risky than Prestige Wealth. It trades about 0.24 of its potential returns per unit of risk. Prestige Wealth Ordinary is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  77.00  in Prestige Wealth Ordinary on September 12, 2024 and sell it today you would earn a total of  88.00  from holding Prestige Wealth Ordinary or generate 114.29% return on investment over 90 days.

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

Biglari Holdings  vs.  Prestige Wealth Ordinary

Biglari Holdings

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 19 (%) 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.

Prestige Wealth Ordinary

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prestige Wealth Ordinary are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Prestige Wealth displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biglari Holdings and Prestige Wealth

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

The idea behind Biglari Holdings and Prestige Wealth Ordinary 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.