Correlation Between Goosehead Insurance and Gladstone Investment

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

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

Diversification Opportunities for Goosehead Insurance and Gladstone Investment

0.15

Correlation Coefficient

Goosehead Insurance  Gladstone Investment

Average diversification

The 3 months correlation between Goosehead and Gladstone is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment 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 Gladstone Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gladstone Investment has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and Gladstone Investment go up and down completely randomly.

Pair Corralation between Goosehead Insurance and Gladstone Investment

Given the investment horizon of 90 days Goosehead Insurance is expected to generate 4.42 times more return on investment than Gladstone Investment. However, Goosehead Insurance is 4.42 times more volatile than Gladstone Investment. It trades about 0.08 of its potential returns per unit of risk. Gladstone Investment is currently generating about 0.05 per unit of risk. If you would invest  3,760  in Goosehead Insurance on October 10, 2024 and sell it today you would earn a total of  6,612  from holding Goosehead Insurance or generate 175.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Goosehead Insurance  vs.  Gladstone Investment

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.

Gladstone Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Gladstone Investment is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Goosehead Insurance and Gladstone Investment

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

The idea behind Goosehead Insurance and Gladstone Investment 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.