Correlation Between Goosehead Insurance and Denison Mines

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

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

Diversification Opportunities for Goosehead Insurance and Denison Mines

0.62

Correlation Coefficient

Goosehead Insurance  Denison Mines

Poor diversification

The 3 months correlation between Goosehead and Denison is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and Denison Mines Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Denison Mines Corp 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 Denison Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Denison Mines Corp has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and Denison Mines go up and down completely randomly.

Pair Corralation between Goosehead Insurance and Denison Mines

Given the investment horizon of 90 days Goosehead Insurance is expected to under-perform the Denison Mines. But the stock apears to be less risky and, when comparing its historical volatility, Goosehead Insurance is 2.51 times less risky than Denison Mines. The stock trades about -0.33 of its potential returns per unit of risk. The Denison Mines Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  219.00  in Denison Mines Corp on October 8, 2024 and sell it today you would lose (9.00) from holding Denison Mines Corp or give up 4.11% of portfolio value over 90 days.

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

Goosehead Insurance  vs.  Denison Mines Corp

Goosehead Insurance

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goosehead Insurance are ranked lower than 10 (%) 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.

Denison Mines Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Denison Mines Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Denison Mines displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goosehead Insurance and Denison Mines

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

The idea behind Goosehead Insurance and Denison Mines Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.