Correlation Between Fairfax Financial and Biglari Holdings

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

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

Diversification Opportunities for Fairfax Financial and Biglari Holdings

-0.09

Correlation Coefficient

Fairfax Financial  Biglari Holdings

Good diversification

The 3 months correlation between Fairfax and Biglari is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari Holdings and Fairfax Financial 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 Fairfax Financial Holdings 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 Fairfax Financial i.e., Fairfax Financial and Biglari Holdings go up and down completely randomly.

Pair Corralation between Fairfax Financial and Biglari Holdings

Assuming the 90 days horizon Fairfax Financial Holdings is expected to generate 0.06 times more return on investment than Biglari Holdings. However, Fairfax Financial Holdings is 16.45 times less risky than Biglari Holdings. It trades about 0.13 of its potential returns per unit of risk. Biglari Holdings is currently generating about -0.09 per unit of risk. If you would invest  1,754  in Fairfax Financial Holdings on December 29, 2024 and sell it today you would earn a total of  22.00  from holding Fairfax Financial Holdings or generate 1.25% return on investment over 90 days.

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

Fairfax Financial Holdings  vs.  Biglari Holdings

Fairfax Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax Financial Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fairfax Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Biglari Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Biglari Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Fairfax Financial and Biglari Holdings

The main advantage of trading using opposite Fairfax Financial and Biglari Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial 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 Fairfax Financial Holdings 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.