Correlation Between Biglari Holdings and Air Products

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

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

Diversification Opportunities for Biglari Holdings and Air Products

-0.1

Correlation Coefficient

Biglari Holdings  Air Products

Good diversification

The 3 months correlation between Biglari and Air is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products and Biglari Holdings 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 Biglari Holdings are associated (or correlated) with Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and Air Products go up and down completely randomly.

Pair Corralation between Biglari Holdings and Air Products

Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 1.71 times more return on investment than Air Products. However, Biglari Holdings is 1.71 times more volatile than Air Products and. It trades about 0.26 of its potential returns per unit of risk. Air Products and is currently generating about 0.01 per unit of risk. 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

Biglari Holdings  vs.  Air Products and

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.

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.

Pair Trading with Biglari Holdings and Air Products

The main advantage of trading using opposite Biglari Holdings and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biglari Holdings position performs unexpectedly, Air Products 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 Air Products will offset losses from the drop in Air Products' long position.

The idea behind Biglari Holdings and Air Products and 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.