Correlation Between Goosehead Insurance and KINDER

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

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

Diversification Opportunities for Goosehead Insurance and KINDER

0.55

Correlation Coefficient

Goosehead Insurance  KINDER

Very weak diversification

The 3 months correlation between Goosehead and KINDER is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and KINDER MORGAN ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINDER MORGAN ENERGY 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 KINDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINDER MORGAN ENERGY has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and KINDER go up and down completely randomly.

Pair Corralation between Goosehead Insurance and KINDER

Given the investment horizon of 90 days Goosehead Insurance is expected to generate 1.98 times more return on investment than KINDER. However, Goosehead Insurance is 1.98 times more volatile than KINDER MORGAN ENERGY. It trades about -0.02 of its potential returns per unit of risk. KINDER MORGAN ENERGY is currently generating about -0.04 per unit of risk. If you would invest  10,908  in Goosehead Insurance on October 7, 2024 and sell it today you would lose (227.00) from holding Goosehead Insurance or give up 2.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	73.17%
Values	Daily Returns

Goosehead Insurance  vs.  KINDER MORGAN ENERGY

Goosehead Insurance

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goosehead Insurance are ranked lower than 11 (%) 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.

KINDER MORGAN ENERGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KINDER MORGAN ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KINDER is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Goosehead Insurance and KINDER

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

The idea behind Goosehead Insurance and KINDER MORGAN ENERGY 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.