Correlation Between Goosehead Insurance and Sprout Social

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

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

Diversification Opportunities for Goosehead Insurance and Sprout Social

0.41

Correlation Coefficient

Goosehead Insurance  Sprout Social

Very weak diversification

The 3 months correlation between Goosehead and Sprout is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and Sprout Social in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprout Social 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 Sprout Social. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprout Social has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and Sprout Social go up and down completely randomly.

Pair Corralation between Goosehead Insurance and Sprout Social

Given the investment horizon of 90 days Goosehead Insurance is expected to under-perform the Sprout Social. But the stock apears to be less risky and, when comparing its historical volatility, Goosehead Insurance is 1.59 times less risky than Sprout Social. The stock trades about -0.49 of its potential returns per unit of risk. The Sprout Social is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  3,200  in Sprout Social on October 5, 2024 and sell it today you would lose (131.00) from holding Sprout Social or give up 4.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Goosehead Insurance  vs.  Sprout Social

Goosehead Insurance

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goosehead Insurance are ranked lower than 10 (%) 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.

Sprout Social

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sprout Social are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Sprout Social may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Goosehead Insurance and Sprout Social

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

The idea behind Goosehead Insurance and Sprout Social 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.