Correlation Between Goosehead Insurance and Knife River

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

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

Diversification Opportunities for Goosehead Insurance and Knife River

-0.58

Correlation Coefficient

Goosehead Insurance  Knife River

Excellent diversification

The 3 months correlation between Goosehead and Knife is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and Knife River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knife River 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 Knife River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knife River has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and Knife River go up and down completely randomly.

Pair Corralation between Goosehead Insurance and Knife River

Given the investment horizon of 90 days Goosehead Insurance is expected to generate 1.13 times more return on investment than Knife River. However, Goosehead Insurance is 1.13 times more volatile than Knife River. It trades about 0.12 of its potential returns per unit of risk. Knife River is currently generating about -0.04 per unit of risk. If you would invest  9,850  in Goosehead Insurance on December 29, 2024 and sell it today you would earn a total of  2,218  from holding Goosehead Insurance or generate 22.52% return on investment over 90 days.

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

Goosehead Insurance  vs.  Knife River

Goosehead Insurance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goosehead Insurance are ranked lower than 9 (%) 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.

Knife River

Risk-Adjusted Performance

Very Weak

Over the last 90 days Knife River has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic 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 Knife River

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

The idea behind Goosehead Insurance and Knife River 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.