Correlation Between Goosehead Insurance and RH

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

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

Diversification Opportunities for Goosehead Insurance and RH

-0.62

Correlation Coefficient

Goosehead Insurance  RH

Excellent diversification

The 3 months correlation between Goosehead and RH is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and RH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RH 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 RH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RH has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and RH go up and down completely randomly.

Pair Corralation between Goosehead Insurance and RH

Given the investment horizon of 90 days Goosehead Insurance is expected to generate 0.97 times more return on investment than RH. However, Goosehead Insurance is 1.03 times less risky than RH. It trades about 0.05 of its potential returns per unit of risk. RH is currently generating about -0.28 per unit of risk. If you would invest  10,829  in Goosehead Insurance on December 17, 2024 and sell it today you would earn a total of  774.00  from holding Goosehead Insurance or generate 7.15% return on investment over 90 days.

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

Goosehead Insurance  vs.  RH

Goosehead Insurance

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Goosehead Insurance are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical indicators, Goosehead Insurance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

RH

Risk-Adjusted Performance

Very Weak

Over the last 90 days RH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Goosehead Insurance and RH

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

The idea behind Goosehead Insurance and RH 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.