Correlation Between Goosehead Insurance and Texas Roadhouse

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

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

Diversification Opportunities for Goosehead Insurance and Texas Roadhouse

0.96

Correlation Coefficient

Goosehead Insurance  Texas Roadhouse

Almost no diversification

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

Pair Corralation between Goosehead Insurance and Texas Roadhouse

Assuming the 90 days trading horizon Goosehead Insurance is expected to under-perform the Texas Roadhouse. But the stock apears to be less risky and, when comparing its historical volatility, Goosehead Insurance is 1.09 times less risky than Texas Roadhouse. The stock trades about -0.44 of its potential returns per unit of risk. The Texas Roadhouse is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  18,230  in Texas Roadhouse on September 23, 2024 and sell it today you would lose (770.00) from holding Texas Roadhouse or give up 4.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Goosehead Insurance  vs.  Texas Roadhouse

Goosehead Insurance

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goosehead Insurance are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Goosehead Insurance unveiled solid returns over the last few months and may actually be approaching a breakup point.

Texas Roadhouse

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Texas Roadhouse reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goosehead Insurance and Texas Roadhouse

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

The idea behind Goosehead Insurance and Texas Roadhouse 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.