Correlation Between Biglari Holdings and Lear
Can any of the company-specific risk be diversified away by investing in both Biglari Holdings and Lear 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 Biglari Holdings and Lear into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Biglari Holdings and Lear Corporation, you can compare the effects of market volatilities on Biglari Holdings and Lear 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 Biglari Holdings with a short position of Lear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biglari Holdings and Lear.
Diversification Opportunities for Biglari Holdings and Lear
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Biglari and Lear is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and Lear Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lear and Biglari Holdings 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 Biglari Holdings are associated (or correlated) with Lear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lear has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and Lear go up and down completely randomly.
Pair Corralation between Biglari Holdings and Lear
Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 1.69 times more return on investment than Lear. However, Biglari Holdings is 1.69 times more volatile than Lear Corporation. It trades about 0.34 of its potential returns per unit of risk. Lear Corporation is currently generating about -0.05 per unit of risk. If you would invest 17,279 in Biglari Holdings on August 30, 2024 and sell it today you would earn a total of 4,221 from holding Biglari Holdings or generate 24.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Biglari Holdings vs. Lear Corp.
Performance |
| Timeline |
| Biglari Holdings |
| Lear |
Biglari Holdings and Lear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Biglari Holdings and Lear
The main advantage of trading using opposite Biglari Holdings and Lear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biglari Holdings position performs unexpectedly, Lear 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 Lear will offset losses from the drop in Lear's long position.| Biglari Holdings vs. Chipotle Mexican Grill | Biglari Holdings vs. Yum Brands | Biglari Holdings vs. The Wendys Co | Biglari Holdings vs. McDonalds |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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