Correlation Between Goosehead Insurance and MULTI-CHEM

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

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

Diversification Opportunities for Goosehead Insurance and MULTI-CHEM

0.65

Correlation Coefficient

Goosehead Insurance  MULTI-CHEM

Poor diversification

The 3 months correlation between Goosehead and MULTI-CHEM is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and MULTI CHEM LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MULTI CHEM LTD 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 MULTI-CHEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MULTI CHEM LTD has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and MULTI-CHEM go up and down completely randomly.

Pair Corralation between Goosehead Insurance and MULTI-CHEM

Assuming the 90 days trading horizon Goosehead Insurance is expected to generate 1.15 times less return on investment than MULTI-CHEM. In addition to that, Goosehead Insurance is 1.13 times more volatile than MULTI CHEM LTD. It trades about 0.06 of its total potential returns per unit of risk. MULTI CHEM LTD is currently generating about 0.08 per unit of volatility. If you would invest  190.00  in MULTI CHEM LTD on December 24, 2024 and sell it today you would earn a total of  22.00  from holding MULTI CHEM LTD or generate 11.58% return on investment over 90 days.

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

Goosehead Insurance  vs.  MULTI CHEM LTD

Goosehead Insurance

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Goosehead Insurance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Goosehead Insurance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

MULTI CHEM LTD

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MULTI CHEM LTD are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MULTI-CHEM reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goosehead Insurance and MULTI-CHEM

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

The idea behind Goosehead Insurance and MULTI CHEM LTD 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.