Correlation Between Estee Lauder and Biglari Holdings

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

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

Diversification Opportunities for Estee Lauder and Biglari Holdings

-0.44

Correlation Coefficient

Estee Lauder  Biglari Holdings

Very good diversification

The 3 months correlation between Estee and Biglari is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari Holdings and Estee Lauder 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 Estee Lauder Companies 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 Estee Lauder i.e., Estee Lauder and Biglari Holdings go up and down completely randomly.

Pair Corralation between Estee Lauder and Biglari Holdings

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the Biglari Holdings. In addition to that, Estee Lauder is 1.25 times more volatile than Biglari Holdings. It trades about -0.11 of its total potential returns per unit of risk. Biglari Holdings is currently generating about 0.27 per unit of volatility. If you would invest  16,972  in Biglari Holdings on September 27, 2024 and sell it today you would earn a total of  9,320  from holding Biglari Holdings or generate 54.91% return on investment over 90 days.

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

Estee Lauder Companies  vs.  Biglari Holdings

Estee Lauder Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Estee Lauder Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Biglari Holdings

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 21 (%) 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 Estee Lauder and Biglari Holdings

The main advantage of trading using opposite Estee Lauder and Biglari Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder 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 Estee Lauder Companies 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.