Correlation Between Good Times and Biglari Holdings

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

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

Diversification Opportunities for Good Times and Biglari Holdings

-0.56

Correlation Coefficient

Good Times  Biglari Holdings

Excellent diversification

The 3 months correlation between Good and Biglari is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Good Times Restaurants and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari Holdings and Good Times 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 Good Times Restaurants 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 Good Times i.e., Good Times and Biglari Holdings go up and down completely randomly.

Pair Corralation between Good Times and Biglari Holdings

Given the investment horizon of 90 days Good Times Restaurants is expected to under-perform the Biglari Holdings. In addition to that, Good Times is 1.12 times more volatile than Biglari Holdings. It trades about -0.05 of its total potential returns per unit of risk. Biglari Holdings is currently generating about 0.22 per unit of volatility. If you would invest  17,145  in Biglari Holdings on September 13, 2024 and sell it today you would earn a total of  5,715  from holding Biglari Holdings or generate 33.33% return on investment over 90 days.

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

Good Times Restaurants  vs.  Biglari Holdings

Good Times Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Good Times Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Biglari Holdings

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 17 (%) 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 Good Times and Biglari Holdings

The main advantage of trading using opposite Good Times and Biglari Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Good Times 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 Good Times Restaurants 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.