Correlation Between Goosehead Insurance and Guangdong Investment

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

Diversification Opportunities for Goosehead Insurance and Guangdong Investment

-0.44

Correlation Coefficient

Goosehead Insurance  Guangdong Investment

Very good diversification

The 3 months correlation between Goosehead and Guangdong is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong 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 Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and Guangdong Investment go up and down completely randomly.

Pair Corralation between Goosehead Insurance and Guangdong Investment

Given the investment horizon of 90 days Goosehead Insurance is expected to generate 0.42 times more return on investment than Guangdong Investment. However, Goosehead Insurance is 2.38 times less risky than Guangdong Investment. It trades about 0.08 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about 0.03 per unit of risk. If you would invest  3,666  in Goosehead Insurance on October 11, 2024 and sell it today you would earn a total of  6,706  from holding Goosehead Insurance or generate 182.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.19%
Values	Daily Returns

Goosehead Insurance  vs.  Guangdong Investment Limited

Goosehead Insurance

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goosehead Insurance are ranked lower than 7 (%) 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.

Guangdong Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Investment Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Guangdong Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goosehead Insurance and Guangdong Investment

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

The idea behind Goosehead Insurance and Guangdong Investment Limited 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.