Correlation Between Biglari Holdings and Groupon

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

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

Diversification Opportunities for Biglari Holdings and Groupon

-0.53

Correlation Coefficient

Biglari Holdings  Groupon

Excellent diversification

The 3 months correlation between Biglari and Groupon is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and Groupon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupon 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 Groupon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Groupon has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and Groupon go up and down completely randomly.

Pair Corralation between Biglari Holdings and Groupon

Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 0.44 times more return on investment than Groupon. However, Biglari Holdings is 2.27 times less risky than Groupon. It trades about 0.06 of its potential returns per unit of risk. Groupon is currently generating about 0.01 per unit of risk. If you would invest  15,941  in Biglari Holdings on September 4, 2024 and sell it today you would earn a total of  5,663  from holding Biglari Holdings or generate 35.52% return on investment over 90 days.

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

Biglari Holdings  vs.  Groupon

Biglari Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Biglari Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Groupon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Groupon has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Biglari Holdings and Groupon

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

The idea behind Biglari Holdings and Groupon 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 Transaction History module to view history of all your transactions and understand their impact on performance.