Correlation Between Air Products and Biglari Holdings

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

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

Diversification Opportunities for Air Products and Biglari Holdings

-0.1

Correlation Coefficient

Air Products  Biglari Holdings

Good diversification

The 3 months correlation between Air and Biglari is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari Holdings and Air Products 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 Air Products and 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 Air Products i.e., Air Products and Biglari Holdings go up and down completely randomly.

Pair Corralation between Air Products and Biglari Holdings

Considering the 90-day investment horizon Air Products is expected to generate 36.13 times less return on investment than Biglari Holdings. But when comparing it to its historical volatility, Air Products and is 1.71 times less risky than Biglari Holdings. It trades about 0.01 of its potential returns per unit of risk. Biglari Holdings is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  17,008  in Biglari Holdings on October 1, 2024 and sell it today you would earn a total of  8,712  from holding Biglari Holdings or generate 51.22% return on investment over 90 days.

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

Air Products and  vs.  Biglari Holdings

Air Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Products and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Air Products is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Biglari Holdings

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 20 (%) 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 Air Products and Biglari Holdings

The main advantage of trading using opposite Air Products and Biglari Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products 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 Air Products and 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.