Correlation Between Goosehead Insurance and VARIOUS EATERIES

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

By analyzing existing cross correlation between Goosehead Insurance and VARIOUS EATERIES LS, you can compare the effects of market volatilities on Goosehead Insurance and VARIOUS EATERIES 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 VARIOUS EATERIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goosehead Insurance and VARIOUS EATERIES.

Diversification Opportunities for Goosehead Insurance and VARIOUS EATERIES

0.17

Correlation Coefficient

Goosehead Insurance  VARIOUS EATERIES

Average diversification

The 3 months correlation between Goosehead and VARIOUS is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and VARIOUS EATERIES LS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VARIOUS EATERIES 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 VARIOUS EATERIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VARIOUS EATERIES has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and VARIOUS EATERIES go up and down completely randomly.

Pair Corralation between Goosehead Insurance and VARIOUS EATERIES

Assuming the 90 days trading horizon Goosehead Insurance is expected to generate 1.65 times more return on investment than VARIOUS EATERIES. However, Goosehead Insurance is 1.65 times more volatile than VARIOUS EATERIES LS. It trades about 0.24 of its potential returns per unit of risk. VARIOUS EATERIES LS is currently generating about 0.01 per unit of risk. If you would invest  7,770  in Goosehead Insurance on September 14, 2024 and sell it today you would earn a total of  3,430  from holding Goosehead Insurance or generate 44.14% return on investment over 90 days.

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

Goosehead Insurance  vs.  VARIOUS EATERIES LS

Goosehead Insurance

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goosehead Insurance are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. 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.

VARIOUS EATERIES

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Goosehead Insurance and VARIOUS EATERIES

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

The idea behind Goosehead Insurance and VARIOUS EATERIES LS 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.