Correlation Between Shopify and Biglari Holdings
Can any of the company-specific risk be diversified away by investing in both Shopify 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 Shopify and Biglari Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shopify and Biglari Holdings, you can compare the effects of market volatilities on Shopify 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 Shopify with a short position of Biglari Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shopify and Biglari Holdings.
Diversification Opportunities for Shopify and Biglari Holdings
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Shopify and Biglari is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Shopify and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari Holdings and Shopify 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 Shopify 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 Shopify i.e., Shopify and Biglari Holdings go up and down completely randomly.
Pair Corralation between Shopify and Biglari Holdings
Given the investment horizon of 90 days Shopify is expected to under-perform the Biglari Holdings. In addition to that, Shopify is 1.26 times more volatile than Biglari Holdings. It trades about -0.2 of its total potential returns per unit of risk. Biglari Holdings is currently generating about 0.21 per unit of volatility. If you would invest 18,739 in Biglari Holdings on January 26, 2024 and sell it today you would earn a total of 1,280 from holding Biglari Holdings or generate 6.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shopify vs. Biglari Holdings
Performance |
| Timeline |
| Shopify |
| Biglari Holdings |
Shopify and Biglari Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shopify and Biglari Holdings
The main advantage of trading using opposite Shopify and Biglari Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shopify 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 Shopify 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.| 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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