Correlation Between Investment and Goosehead Insurance

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

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

Diversification Opportunities for Investment and Goosehead Insurance

0.08

Correlation Coefficient

Investment  Goosehead Insurance

Significant diversification

The 3 months correlation between Investment and Goosehead is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Investment AB Latour and Goosehead Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goosehead Insurance and Investment 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 Investment AB Latour are associated (or correlated) with Goosehead Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goosehead Insurance has no effect on the direction of Investment i.e., Investment and Goosehead Insurance go up and down completely randomly.

Pair Corralation between Investment and Goosehead Insurance

Assuming the 90 days horizon Investment AB Latour is expected to under-perform the Goosehead Insurance. But the otc stock apears to be less risky and, when comparing its historical volatility, Investment AB Latour is 3.75 times less risky than Goosehead Insurance. The otc stock trades about -0.16 of its potential returns per unit of risk. The Goosehead Insurance is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  10,813  in Goosehead Insurance on October 24, 2024 and sell it today you would lose (181.00) from holding Goosehead Insurance or give up 1.67% of portfolio value over 90 days.

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

Investment AB Latour  vs.  Goosehead Insurance

Investment AB Latour

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investment AB Latour has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Investment is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Goosehead Insurance

Risk-Adjusted Performance

0 of 100

Insignificant

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.

Pair Trading with Investment and Goosehead Insurance

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

The idea behind Investment AB Latour and Goosehead Insurance 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.