Correlation Between Blue Moon and Biglari Holdings

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

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

Diversification Opportunities for Blue Moon and Biglari Holdings

0.43

Correlation Coefficient

Blue Moon  Biglari Holdings

Very weak diversification

The 3 months correlation between Blue and Biglari is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Blue Moon Metals and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari Holdings and Blue Moon 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 Blue Moon Metals are associated (or correlated) with Biglari Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biglari Holdings has no effect on the direction of Blue Moon i.e., Blue Moon and Biglari Holdings go up and down completely randomly.

Pair Corralation between Blue Moon and Biglari Holdings

Assuming the 90 days horizon Blue Moon Metals is expected to generate 6.83 times more return on investment than Biglari Holdings. However, Blue Moon is 6.83 times more volatile than Biglari Holdings. It trades about 0.13 of its potential returns per unit of risk. Biglari Holdings is currently generating about 0.06 per unit of risk. If you would invest  2.97  in Blue Moon Metals on September 24, 2024 and sell it today you would earn a total of  22.03  from holding Blue Moon Metals or generate 741.75% return on investment over 90 days.

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

Blue Moon Metals  vs.  Biglari Holdings

Blue Moon Metals

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Moon Metals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Blue Moon reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Blue Moon and Biglari Holdings

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

The idea behind Blue Moon Metals and Biglari 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.