Correlation Between Sapiens International and Biglari Holdings

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

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

Diversification Opportunities for Sapiens International and Biglari Holdings

0.22

Correlation Coefficient

Sapiens International  Biglari Holdings

Modest diversification

The 3 months correlation between Sapiens and Biglari is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Sapiens International and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari Holdings and Sapiens International 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 Sapiens International 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 Sapiens International i.e., Sapiens International and Biglari Holdings go up and down completely randomly.

Pair Corralation between Sapiens International and Biglari Holdings

Given the investment horizon of 90 days Sapiens International is expected to generate 0.66 times more return on investment than Biglari Holdings. However, Sapiens International is 1.51 times less risky than Biglari Holdings. It trades about -0.02 of its potential returns per unit of risk. Biglari Holdings is currently generating about -0.07 per unit of risk. If you would invest  2,776  in Sapiens International on December 20, 2024 and sell it today you would lose (70.00) from holding Sapiens International or give up 2.52% of portfolio value over 90 days.

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

Sapiens International  vs.  Biglari Holdings

Sapiens International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sapiens International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sapiens International is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private 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 latest unsteady performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Sapiens International and Biglari Holdings

The main advantage of trading using opposite Sapiens International and Biglari Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sapiens International 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 Sapiens International 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..