Correlation Between Goosehead Insurance and Ultra Clean

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

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

Diversification Opportunities for Goosehead Insurance and Ultra Clean

-0.78

Correlation Coefficient

Goosehead Insurance  Ultra Clean

Pay attention - limited upside

The 3 months correlation between Goosehead and Ultra is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and Ultra Clean Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Clean Holdings 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 Ultra Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Clean Holdings has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and Ultra Clean go up and down completely randomly.

Pair Corralation between Goosehead Insurance and Ultra Clean

Assuming the 90 days trading horizon Goosehead Insurance is expected to generate 0.62 times more return on investment than Ultra Clean. However, Goosehead Insurance is 1.62 times less risky than Ultra Clean. It trades about 0.3 of its potential returns per unit of risk. Ultra Clean Holdings is currently generating about -0.1 per unit of risk. If you would invest  7,518  in Goosehead Insurance on September 3, 2024 and sell it today you would earn a total of  4,442  from holding Goosehead Insurance or generate 59.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Goosehead Insurance  vs.  Ultra Clean Holdings

Goosehead Insurance

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goosehead Insurance are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Goosehead Insurance unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ultra Clean Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultra Clean Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Goosehead Insurance and Ultra Clean

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

The idea behind Goosehead Insurance and Ultra Clean Holdings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..