Correlation Between Biglari Holdings and Zapata Computing

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

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

Diversification Opportunities for Biglari Holdings and Zapata Computing

0.17

Correlation Coefficient

Biglari Holdings  Zapata Computing

Average diversification

The 3 months correlation between Biglari and Zapata is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and Zapata Computing Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zapata Computing Holdings 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 Zapata Computing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zapata Computing Holdings has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and Zapata Computing go up and down completely randomly.

Pair Corralation between Biglari Holdings and Zapata Computing

Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 11.97 times less return on investment than Zapata Computing. But when comparing it to its historical volatility, Biglari Holdings is 15.89 times less risky than Zapata Computing. It trades about 0.05 of its potential returns per unit of risk. Zapata Computing Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  43.00  in Zapata Computing Holdings on October 4, 2024 and sell it today you would lose (42.44) from holding Zapata Computing Holdings or give up 98.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	78.85%
Values	Daily Returns

Biglari Holdings  vs.  Zapata Computing Holdings

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 weak technical indicators, Biglari Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Zapata Computing Holdings

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Zapata Computing Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Zapata Computing showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biglari Holdings and Zapata Computing

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

The idea behind Biglari Holdings and Zapata Computing Holdings 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.