Correlation Between Goosehead Insurance and Metal Sky

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

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

Diversification Opportunities for Goosehead Insurance and Metal Sky

-0.38

Correlation Coefficient

Goosehead Insurance  Metal Sky

Very good diversification

The 3 months correlation between Goosehead and Metal is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and Metal Sky Star in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metal Sky Star 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 Metal Sky. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metal Sky Star has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and Metal Sky go up and down completely randomly.

Pair Corralation between Goosehead Insurance and Metal Sky

Given the investment horizon of 90 days Goosehead Insurance is expected to generate 5.47 times less return on investment than Metal Sky. But when comparing it to its historical volatility, Goosehead Insurance is 7.84 times less risky than Metal Sky. It trades about 0.11 of its potential returns per unit of risk. Metal Sky Star is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5.66  in Metal Sky Star on October 10, 2024 and sell it today you would lose (0.65) from holding Metal Sky Star or give up 11.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	37.7%
Values	Daily Returns

Goosehead Insurance  vs.  Metal Sky Star

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.

Metal Sky Star

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Metal Sky Star has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak basic indicators, Metal Sky reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goosehead Insurance and Metal Sky

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

The idea behind Goosehead Insurance and Metal Sky Star 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.