Correlation Between FAT Brands and Biglari Holdings
Can any of the company-specific risk be diversified away by investing in both FAT Brands 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 FAT Brands and Biglari Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FAT Brands and Biglari Holdings, you can compare the effects of market volatilities on FAT Brands 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 FAT Brands with a short position of Biglari Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAT Brands and Biglari Holdings.
Diversification Opportunities for FAT Brands and Biglari Holdings
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between FAT and Biglari is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding FAT Brands and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari Holdings and FAT Brands 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 FAT Brands 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 FAT Brands i.e., FAT Brands and Biglari Holdings go up and down completely randomly.
Pair Corralation between FAT Brands and Biglari Holdings
Assuming the 90 days horizon FAT Brands is expected to under-perform the Biglari Holdings. In addition to that, FAT Brands is 1.13 times more volatile than Biglari Holdings. It trades about -0.02 of its total potential returns per unit of risk. Biglari Holdings is currently generating about 0.31 per unit of volatility. If you would invest 17,261 in Biglari Holdings on August 28, 2024 and sell it today you would earn a total of 3,437 from holding Biglari Holdings or generate 19.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FAT Brands vs. Biglari Holdings
Performance |
| Timeline |
| FAT Brands |
| Biglari Holdings |
FAT Brands and Biglari Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FAT Brands and Biglari Holdings
The main advantage of trading using opposite FAT Brands and Biglari Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAT Brands 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.| FAT Brands vs. FAT Brands | FAT Brands vs. Brinker International | FAT Brands vs. Jack In The | FAT Brands vs. Potbelly Co |
| Biglari Holdings vs. Cannae Holdings | Biglari Holdings vs. BJs Restaurants | Biglari Holdings vs. Ark Restaurants Corp | Biglari Holdings vs. Noble Romans |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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