Correlation Between Biglari Holdings and CarsalesCom

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

By analyzing existing cross correlation between Biglari Holdings and CarsalesCom Ltd ADR, you can compare the effects of market volatilities on Biglari Holdings and CarsalesCom 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 CarsalesCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biglari Holdings and CarsalesCom.

Diversification Opportunities for Biglari Holdings and CarsalesCom

0.34

Correlation Coefficient

Biglari Holdings  CarsalesCom

Weak diversification

The 3 months correlation between Biglari and CarsalesCom is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and CarsalesCom Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom ADR 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 CarsalesCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom ADR has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and CarsalesCom go up and down completely randomly.

Pair Corralation between Biglari Holdings and CarsalesCom

Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 0.78 times more return on investment than CarsalesCom. However, Biglari Holdings is 1.28 times less risky than CarsalesCom. It trades about 0.21 of its potential returns per unit of risk. CarsalesCom Ltd ADR is currently generating about 0.07 per unit of risk. If you would invest  16,969  in Biglari Holdings on September 5, 2024 and sell it today you would earn a total of  5,431  from holding Biglari Holdings or generate 32.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Biglari Holdings  vs.  CarsalesCom Ltd ADR

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.

CarsalesCom ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom Ltd ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CarsalesCom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Biglari Holdings and CarsalesCom

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

The idea behind Biglari Holdings and CarsalesCom Ltd ADR 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.