Correlation Between Bowhead Specialty and Goosehead Insurance

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

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

Diversification Opportunities for Bowhead Specialty and Goosehead Insurance

0.69

Correlation Coefficient

Bowhead Specialty  Goosehead Insurance

Poor diversification

The 3 months correlation between Bowhead and Goosehead is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bowhead Specialty Holdings and Goosehead Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goosehead Insurance and Bowhead Specialty 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 Bowhead Specialty Holdings are associated (or correlated) with Goosehead Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goosehead Insurance has no effect on the direction of Bowhead Specialty i.e., Bowhead Specialty and Goosehead Insurance go up and down completely randomly.

Pair Corralation between Bowhead Specialty and Goosehead Insurance

Considering the 90-day investment horizon Bowhead Specialty Holdings is expected to generate 0.84 times more return on investment than Goosehead Insurance. However, Bowhead Specialty Holdings is 1.19 times less risky than Goosehead Insurance. It trades about 0.1 of its potential returns per unit of risk. Goosehead Insurance is currently generating about 0.0 per unit of risk. If you would invest  2,951  in Bowhead Specialty Holdings on October 24, 2024 and sell it today you would earn a total of  329.00  from holding Bowhead Specialty Holdings or generate 11.15% return on investment over 90 days.

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

Bowhead Specialty Holdings  vs.  Goosehead Insurance

Bowhead Specialty

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bowhead Specialty Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Bowhead Specialty may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Goosehead Insurance

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Goosehead Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Goosehead Insurance is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bowhead Specialty and Goosehead Insurance

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

The idea behind Bowhead Specialty Holdings and Goosehead Insurance 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.