Correlation Between Royalty Management and Biglari Holdings

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

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

Diversification Opportunities for Royalty Management and Biglari Holdings

0.09

Correlation Coefficient

Royalty Management  Biglari Holdings

Significant diversification

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

Pair Corralation between Royalty Management and Biglari Holdings

Given the investment horizon of 90 days Royalty Management Holding is expected to generate 1.26 times more return on investment than Biglari Holdings. However, Royalty Management is 1.26 times more volatile than Biglari Holdings. It trades about 0.07 of its potential returns per unit of risk. Biglari Holdings is currently generating about -0.12 per unit of risk. If you would invest  101.00  in Royalty Management Holding on December 28, 2024 and sell it today you would earn a total of  10.00  from holding Royalty Management Holding or generate 9.9% return on investment over 90 days.

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

Royalty Management Holding  vs.  Biglari Holdings

Royalty Management

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Royalty Management Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, Royalty Management displayed solid returns over the last few months and may actually be approaching a breakup point.

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 Royalty Management and Biglari Holdings

The main advantage of trading using opposite Royalty Management and Biglari Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royalty Management 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 Royalty Management Holding 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.