Correlation Between Goosehead Insurance and PNC Financial

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

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

Diversification Opportunities for Goosehead Insurance and PNC Financial

0.96

Correlation Coefficient

Goosehead Insurance  PNC Financial

Almost no diversification

The 3 months correlation between Goosehead and PNC is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and The PNC Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNC Financial 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 PNC Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PNC Financial has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and PNC Financial go up and down completely randomly.

Pair Corralation between Goosehead Insurance and PNC Financial

Assuming the 90 days trading horizon Goosehead Insurance is expected to generate 0.84 times more return on investment than PNC Financial. However, Goosehead Insurance is 1.19 times less risky than PNC Financial. It trades about 0.43 of its potential returns per unit of risk. The PNC Financial is currently generating about 0.3 per unit of risk. If you would invest  9,756  in Goosehead Insurance on September 5, 2024 and sell it today you would earn a total of  2,014  from holding Goosehead Insurance or generate 20.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

Goosehead Insurance  vs.  The PNC Financial

Goosehead Insurance

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goosehead Insurance are ranked lower than 21 (%) 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.

PNC Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The PNC Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, PNC Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goosehead Insurance and PNC Financial

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

The idea behind Goosehead Insurance and The PNC Financial 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.