Correlation Between Biglari Holdings and Planet Fitness

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

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

Diversification Opportunities for Biglari Holdings and Planet Fitness

0.92

Correlation Coefficient

Biglari Holdings  Planet Fitness

Almost no diversification

The 3 months correlation between Biglari and Planet is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and Planet Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Fitness 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 Planet Fitness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Planet Fitness has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and Planet Fitness go up and down completely randomly.

Pair Corralation between Biglari Holdings and Planet Fitness

Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 2.06 times more return on investment than Planet Fitness. However, Biglari Holdings is 2.06 times more volatile than Planet Fitness. It trades about 0.4 of its potential returns per unit of risk. Planet Fitness is currently generating about 0.2 per unit of risk. If you would invest  21,000  in Biglari Holdings on September 18, 2024 and sell it today you would earn a total of  4,669  from holding Biglari Holdings or generate 22.23% return on investment over 90 days.

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

Biglari Holdings  vs.  Planet Fitness

Biglari Holdings

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical indicators, Biglari Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Planet Fitness

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Planet Fitness unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biglari Holdings and Planet Fitness

The main advantage of trading using opposite Biglari Holdings and Planet Fitness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biglari Holdings position performs unexpectedly, Planet Fitness 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 Planet Fitness will offset losses from the drop in Planet Fitness' long position.

The idea behind Biglari Holdings and Planet Fitness 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.