Correlation Between Goosehead Insurance and AmTrust Financial

Can any of the company-specific risk be diversified away by investing in both Goosehead Insurance and AmTrust 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 AmTrust 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 AmTrust Financial Services, you can compare the effects of market volatilities on Goosehead Insurance and AmTrust 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 AmTrust Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goosehead Insurance and AmTrust Financial.

Diversification Opportunities for Goosehead Insurance and AmTrust Financial

0.61

Correlation Coefficient

Goosehead Insurance  AmTrust Financial

Poor diversification

The 3 months correlation between Goosehead and AmTrust is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and AmTrust Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmTrust 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 AmTrust Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmTrust Financial has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and AmTrust Financial go up and down completely randomly.

Pair Corralation between Goosehead Insurance and AmTrust Financial

Given the investment horizon of 90 days Goosehead Insurance is expected to generate 2.64 times more return on investment than AmTrust Financial. However, Goosehead Insurance is 2.64 times more volatile than AmTrust Financial Services. It trades about 0.05 of its potential returns per unit of risk. AmTrust Financial Services is currently generating about 0.08 per unit of risk. If you would invest  10,443  in Goosehead Insurance on October 24, 2024 and sell it today you would earn a total of  189.00  from holding Goosehead Insurance or generate 1.81% return on investment over 90 days.

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

Goosehead Insurance  vs.  AmTrust Financial Services

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.

AmTrust Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AmTrust Financial Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, AmTrust Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Goosehead Insurance and AmTrust Financial

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

The idea behind Goosehead Insurance and AmTrust Financial Services 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..