Correlation Between Texas Roadhouse and Biglari Holdings

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

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

Diversification Opportunities for Texas Roadhouse and Biglari Holdings

0.69

Correlation Coefficient

Texas Roadhouse  Biglari Holdings

Poor diversification

The 3 months correlation between Texas and Biglari is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari Holdings and Texas Roadhouse 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 Texas Roadhouse 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 Texas Roadhouse i.e., Texas Roadhouse and Biglari Holdings go up and down completely randomly.

Pair Corralation between Texas Roadhouse and Biglari Holdings

Given the investment horizon of 90 days Texas Roadhouse is expected to generate 2.11 times less return on investment than Biglari Holdings. But when comparing it to its historical volatility, Texas Roadhouse is 1.25 times less risky than Biglari Holdings. It trades about 0.15 of its potential returns per unit of risk. Biglari Holdings is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  17,000  in Biglari Holdings on September 14, 2024 and sell it today you would earn a total of  6,610  from holding Biglari Holdings or generate 38.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Texas Roadhouse  vs.  Biglari Holdings

Texas Roadhouse

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Texas Roadhouse demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with Texas Roadhouse and Biglari Holdings

The main advantage of trading using opposite Texas Roadhouse and Biglari Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Roadhouse 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 Texas Roadhouse 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 CEOs Directory module to screen CEOs from public companies around the world.