Correlation Between Goosehead Insurance and Arteris

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

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

Diversification Opportunities for Goosehead Insurance and Arteris

0.45

Correlation Coefficient

Goosehead Insurance  Arteris

Very weak diversification

The 3 months correlation between Goosehead and Arteris is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and Arteris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arteris 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 Arteris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arteris has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and Arteris go up and down completely randomly.

Pair Corralation between Goosehead Insurance and Arteris

Given the investment horizon of 90 days Goosehead Insurance is expected to generate 1.01 times less return on investment than Arteris. But when comparing it to its historical volatility, Goosehead Insurance is 1.48 times less risky than Arteris. It trades about 0.08 of its potential returns per unit of risk. Arteris is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  515.00  in Arteris on October 4, 2024 and sell it today you would earn a total of  618.00  from holding Arteris or generate 120.0% return on investment over 90 days.

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

Goosehead Insurance  vs.  Arteris

Goosehead Insurance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goosehead Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical indicators, Goosehead Insurance exhibited solid returns over the last few months and may actually be approaching a breakup point.

Arteris

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arteris are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, Arteris reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goosehead Insurance and Arteris

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

The idea behind Goosehead Insurance and Arteris 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.