Correlation Between RCI Hospitality and Biglari Holdings

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

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

Diversification Opportunities for RCI Hospitality and Biglari Holdings

0.69

Correlation Coefficient

RCI Hospitality  Biglari Holdings

Poor diversification

The 3 months correlation between RCI and Biglari is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari Holdings and RCI Hospitality 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 RCI Hospitality 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 RCI Hospitality i.e., RCI Hospitality and Biglari Holdings go up and down completely randomly.

Pair Corralation between RCI Hospitality and Biglari Holdings

Given the investment horizon of 90 days RCI Hospitality Holdings is expected to under-perform the Biglari Holdings. But the stock apears to be less risky and, when comparing its historical volatility, RCI Hospitality Holdings is 1.33 times less risky than Biglari Holdings. The stock trades about -0.19 of its potential returns per unit of risk. The Biglari Holdings is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  25,720  in Biglari Holdings on December 27, 2024 and sell it today you would lose (4,580) from holding Biglari Holdings or give up 17.81% of portfolio value over 90 days.

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

RCI Hospitality Holdings  vs.  Biglari Holdings

RCI Hospitality Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days RCI Hospitality Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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 RCI Hospitality and Biglari Holdings

The main advantage of trading using opposite RCI Hospitality and Biglari Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCI Hospitality 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 RCI Hospitality 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.