Correlation Between MSP Recovery and Biglari Holdings

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

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

Diversification Opportunities for MSP Recovery and Biglari Holdings

-0.85

Correlation Coefficient

MSP Recovery  Biglari Holdings

Pay attention - limited upside

The 3 months correlation between MSP and Biglari is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding MSP Recovery and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari Holdings and MSP Recovery 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 MSP Recovery 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 MSP Recovery i.e., MSP Recovery and Biglari Holdings go up and down completely randomly.

Pair Corralation between MSP Recovery and Biglari Holdings

Given the investment horizon of 90 days MSP Recovery is expected to generate 7.0 times more return on investment than Biglari Holdings. However, MSP Recovery is 7.0 times more volatile than Biglari Holdings. It trades about 0.04 of its potential returns per unit of risk. Biglari Holdings is currently generating about 0.24 per unit of risk. If you would invest  383.00  in MSP Recovery on September 12, 2024 and sell it today you would lose (59.00) from holding MSP Recovery or give up 15.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

MSP Recovery  vs.  Biglari Holdings

MSP Recovery

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MSP Recovery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, MSP Recovery showed solid returns over the last few months and may actually be approaching a breakup point.

Biglari Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical indicators, Biglari Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MSP Recovery and Biglari Holdings

The main advantage of trading using opposite MSP Recovery and Biglari Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSP Recovery 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 MSP Recovery 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.