Correlation Between Goosehead Insurance and Universal Insurance

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

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

Diversification Opportunities for Goosehead Insurance and Universal Insurance

0.85

Correlation Coefficient

Goosehead Insurance  Universal Insurance

Very poor diversification

The 3 months correlation between Goosehead and Universal is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance 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 Universal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Insurance has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and Universal Insurance go up and down completely randomly.

Pair Corralation between Goosehead Insurance and Universal Insurance

Given the investment horizon of 90 days Goosehead Insurance is expected to generate 1.88 times more return on investment than Universal Insurance. However, Goosehead Insurance is 1.88 times more volatile than Universal Insurance Holdings. It trades about 0.06 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about -0.28 per unit of risk. If you would invest  9,932  in Goosehead Insurance on October 25, 2024 and sell it today you would earn a total of  253.00  from holding Goosehead Insurance or generate 2.55% return on investment over 90 days.

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

Goosehead Insurance  vs.  Universal Insurance Holdings

Goosehead Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goosehead Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Goosehead Insurance is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Universal Insurance

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Universal Insurance Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Universal Insurance is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Goosehead Insurance and Universal Insurance

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

The idea behind Goosehead Insurance and Universal Insurance Holdings 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.