Correlation Between Goosehead Insurance and Ford

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

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

Diversification Opportunities for Goosehead Insurance and Ford

0.33

Correlation Coefficient

Goosehead Insurance  Ford

Weak diversification

The 3 months correlation between Goosehead and Ford is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and Ford go up and down completely randomly.

Pair Corralation between Goosehead Insurance and Ford

Given the investment horizon of 90 days Goosehead Insurance is expected to generate 1.37 times more return on investment than Ford. However, Goosehead Insurance is 1.37 times more volatile than Ford Motor. It trades about 0.08 of its potential returns per unit of risk. Ford Motor is currently generating about 0.0 per unit of risk. If you would invest  3,714  in Goosehead Insurance on October 4, 2024 and sell it today you would earn a total of  6,806  from holding Goosehead Insurance or generate 183.25% return on investment over 90 days.

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

Goosehead Insurance  vs.  Ford Motor

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.

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Goosehead Insurance and Ford

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

The idea behind Goosehead Insurance and Ford Motor 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.