Correlation Between Biglari Holdings and 126650BR0

Can any of the company-specific risk be diversified away by investing in both Biglari Holdings and 126650BR0 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 126650BR0 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Biglari Holdings and CVS HEALTH P, you can compare the effects of market volatilities on Biglari Holdings and 126650BR0 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 126650BR0. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biglari Holdings and 126650BR0.

Diversification Opportunities for Biglari Holdings and 126650BR0

-0.35

Correlation Coefficient

Biglari Holdings  126650BR0

Very good diversification

The 3 months correlation between Biglari and 126650BR0 is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and CVS HEALTH P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS HEALTH P 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 126650BR0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS HEALTH P has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and 126650BR0 go up and down completely randomly.

Pair Corralation between Biglari Holdings and 126650BR0

Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 23.7 times less return on investment than 126650BR0. But when comparing it to its historical volatility, Biglari Holdings is 21.7 times less risky than 126650BR0. It trades about 0.04 of its potential returns per unit of risk. CVS HEALTH P is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10,544  in CVS HEALTH P on December 2, 2024 and sell it today you would lose (102.00) from holding CVS HEALTH P or give up 0.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.08%
Values	Daily Returns

Biglari Holdings  vs.  CVS HEALTH P

Biglari Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 7 (%) 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.

CVS HEALTH P

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CVS HEALTH P are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 126650BR0 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Biglari Holdings and 126650BR0

The main advantage of trading using opposite Biglari Holdings and 126650BR0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biglari Holdings position performs unexpectedly, 126650BR0 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 126650BR0 will offset losses from the drop in 126650BR0's long position.

The idea behind Biglari Holdings and CVS HEALTH P 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.