Correlation Between Xponential Fitness and Biglari Holdings

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

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

Diversification Opportunities for Xponential Fitness and Biglari Holdings

0.79

Correlation Coefficient

Xponential Fitness  Biglari Holdings

Poor diversification

The 3 months correlation between Xponential and Biglari is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Xponential Fitness and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari Holdings and Xponential Fitness 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 Xponential Fitness 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 Xponential Fitness i.e., Xponential Fitness and Biglari Holdings go up and down completely randomly.

Pair Corralation between Xponential Fitness and Biglari Holdings

Given the investment horizon of 90 days Xponential Fitness is expected to generate 1.65 times less return on investment than Biglari Holdings. In addition to that, Xponential Fitness is 2.5 times more volatile than Biglari Holdings. It trades about 0.01 of its total potential returns per unit of risk. Biglari Holdings is currently generating about 0.06 per unit of volatility. If you would invest  14,110  in Biglari Holdings on September 5, 2024 and sell it today you would earn a total of  8,290  from holding Biglari Holdings or generate 58.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Xponential Fitness  vs.  Biglari Holdings

Xponential Fitness

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xponential Fitness are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Xponential Fitness reported solid returns over the last few months and may actually be approaching a breakup point.

Biglari Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 16 (%) 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 Xponential Fitness and Biglari Holdings

The main advantage of trading using opposite Xponential Fitness and Biglari Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xponential Fitness 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 Xponential Fitness 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.