Correlation Between Fiesta Restaurant and Biglari Holdings

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

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

Diversification Opportunities for Fiesta Restaurant and Biglari Holdings

0.22

Correlation Coefficient

Fiesta Restaurant  Biglari Holdings

Modest diversification

The 3 months correlation between Fiesta and Biglari is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Fiesta Restaurant Group and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari Holdings and Fiesta Restaurant 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 Fiesta Restaurant Group 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 Fiesta Restaurant i.e., Fiesta Restaurant and Biglari Holdings go up and down completely randomly.

Pair Corralation between Fiesta Restaurant and Biglari Holdings

Given the investment horizon of 90 days Fiesta Restaurant Group is expected to generate 1.12 times more return on investment than Biglari Holdings. However, Fiesta Restaurant is 1.12 times more volatile than Biglari Holdings. It trades about 0.06 of its potential returns per unit of risk. Biglari Holdings is currently generating about 0.06 per unit of risk. If you would invest  683.00  in Fiesta Restaurant Group on September 5, 2024 and sell it today you would earn a total of  123.00  from holding Fiesta Restaurant Group or generate 18.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	30.57%
Values	Daily Returns

Fiesta Restaurant Group  vs.  Biglari Holdings

Fiesta Restaurant

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fiesta Restaurant Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Fiesta Restaurant is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Biglari Holdings

Risk-Adjusted Performance

16 of 100

Good

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 inconsistent technical indicators, Biglari Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fiesta Restaurant and Biglari Holdings

The main advantage of trading using opposite Fiesta Restaurant and Biglari Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fiesta Restaurant 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 Fiesta Restaurant Group 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.