Correlation Between Biglari Holdings and Stepan
Can any of the company-specific risk be diversified away by investing in both Biglari Holdings and Stepan 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 Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Biglari Holdings and Stepan Company, you can compare the effects of market volatilities on Biglari Holdings and Stepan 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 Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biglari Holdings and Stepan.
Diversification Opportunities for Biglari Holdings and Stepan
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Biglari and Stepan is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company 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 Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and Stepan go up and down completely randomly.
Pair Corralation between Biglari Holdings and Stepan
Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 1.35 times more return on investment than Stepan. However, Biglari Holdings is 1.35 times more volatile than Stepan Company. It trades about 0.07 of its potential returns per unit of risk. Stepan Company is currently generating about -0.02 per unit of risk. If you would invest 15,172 in Biglari Holdings on September 2, 2024 and sell it today you would earn a total of 5,871 from holding Biglari Holdings or generate 38.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Biglari Holdings vs. Stepan Company
Performance |
| Timeline |
| Biglari Holdings |
| Stepan Company |
Biglari Holdings and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Biglari Holdings and Stepan
The main advantage of trading using opposite Biglari Holdings and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biglari Holdings position performs unexpectedly, Stepan 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 Stepan will offset losses from the drop in Stepan's long position.| Biglari Holdings vs. Cannae Holdings | Biglari Holdings vs. BJs Restaurants | Biglari Holdings vs. Ark Restaurants Corp | Biglari Holdings vs. Noble Romans |
| Stepan vs. Linde plc Ordinary | Stepan vs. Air Products and | Stepan vs. Aquagold International | Stepan vs. Thrivent High Yield |
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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