Correlation Between Biglari Holdings and Telecom

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

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

Diversification Opportunities for Biglari Holdings and Telecom

-0.61

Correlation Coefficient

Biglari Holdings  Telecom

Excellent diversification

The 3 months correlation between Biglari and Telecom is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and Telecom Italia Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Italia Capital 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 Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecom Italia Capital has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and Telecom go up and down completely randomly.

Pair Corralation between Biglari Holdings and Telecom

Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 1.99 times more return on investment than Telecom. However, Biglari Holdings is 1.99 times more volatile than Telecom Italia Capital. It trades about 0.24 of its potential returns per unit of risk. Telecom Italia Capital is currently generating about -0.1 per unit of risk. If you would invest  16,926  in Biglari Holdings on September 24, 2024 and sell it today you would earn a total of  8,142  from holding Biglari Holdings or generate 48.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Biglari Holdings  vs.  Telecom Italia Capital

Biglari Holdings

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 19 (%) 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.

Telecom Italia Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telecom Italia Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Telecom Italia Capital investors.

Pair Trading with Biglari Holdings and Telecom

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

The idea behind Biglari Holdings and Telecom Italia Capital 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 Commodity Directory module to find actively traded commodities issued by global exchanges.