Correlation Between Goosehead Insurance and HYDROFARM HLD

Can any of the company-specific risk be diversified away by investing in both Goosehead Insurance and HYDROFARM HLD 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 Goosehead Insurance and HYDROFARM HLD into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Goosehead Insurance and HYDROFARM HLD GRP, you can compare the effects of market volatilities on Goosehead Insurance and HYDROFARM HLD 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 Goosehead Insurance with a short position of HYDROFARM HLD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goosehead Insurance and HYDROFARM HLD.

Diversification Opportunities for Goosehead Insurance and HYDROFARM HLD

0.28

Correlation Coefficient

Goosehead Insurance  HYDROFARM HLD

Modest diversification

The 3 months correlation between Goosehead and HYDROFARM is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and HYDROFARM HLD GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HYDROFARM HLD GRP and Goosehead Insurance 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 Goosehead Insurance are associated (or correlated) with HYDROFARM HLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HYDROFARM HLD GRP has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and HYDROFARM HLD go up and down completely randomly.

Pair Corralation between Goosehead Insurance and HYDROFARM HLD

Assuming the 90 days trading horizon Goosehead Insurance is expected to generate 0.58 times more return on investment than HYDROFARM HLD. However, Goosehead Insurance is 1.73 times less risky than HYDROFARM HLD. It trades about 0.16 of its potential returns per unit of risk. HYDROFARM HLD GRP is currently generating about -0.02 per unit of risk. If you would invest  8,050  in Goosehead Insurance on October 8, 2024 and sell it today you would earn a total of  2,125  from holding Goosehead Insurance or generate 26.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Goosehead Insurance  vs.  HYDROFARM HLD GRP

Goosehead Insurance

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Goosehead Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Goosehead Insurance unveiled solid returns over the last few months and may actually be approaching a breakup point.

HYDROFARM HLD GRP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HYDROFARM HLD GRP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, HYDROFARM HLD is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Goosehead Insurance and HYDROFARM HLD

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

The idea behind Goosehead Insurance and HYDROFARM HLD GRP 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.