Correlation Between Goosehead Insurance and CONSTELLATION

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

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

Diversification Opportunities for Goosehead Insurance and CONSTELLATION

-0.35

Correlation Coefficient

Goosehead Insurance  CONSTELLATION

Very good diversification

The 3 months correlation between Goosehead and CONSTELLATION is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and CONSTELLATION BRANDS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSTELLATION BRANDS INC 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 CONSTELLATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONSTELLATION BRANDS INC has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and CONSTELLATION go up and down completely randomly.

Pair Corralation between Goosehead Insurance and CONSTELLATION

Given the investment horizon of 90 days Goosehead Insurance is expected to under-perform the CONSTELLATION. In addition to that, Goosehead Insurance is 1.3 times more volatile than CONSTELLATION BRANDS INC. It trades about -0.33 of its total potential returns per unit of risk. CONSTELLATION BRANDS INC is currently generating about -0.19 per unit of volatility. If you would invest  8,724  in CONSTELLATION BRANDS INC on October 8, 2024 and sell it today you would lose (250.00) from holding CONSTELLATION BRANDS INC or give up 2.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	57.89%
Values	Daily Returns

Goosehead Insurance  vs.  CONSTELLATION BRANDS INC

Goosehead Insurance

Risk-Adjusted Performance

10 of 100

Good

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.

CONSTELLATION BRANDS INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONSTELLATION BRANDS INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CONSTELLATION BRANDS INC investors.

Pair Trading with Goosehead Insurance and CONSTELLATION

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

The idea behind Goosehead Insurance and CONSTELLATION BRANDS INC 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.