Correlation Between NI Holdings and Goosehead Insurance

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

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

Diversification Opportunities for NI Holdings and Goosehead Insurance

0.67

Correlation Coefficient

NI Holdings  Goosehead Insurance

Poor diversification

The 3 months correlation between NODK and Goosehead is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding NI Holdings and Goosehead Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goosehead Insurance and NI Holdings 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 NI Holdings 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 NI Holdings i.e., NI Holdings and Goosehead Insurance go up and down completely randomly.

Pair Corralation between NI Holdings and Goosehead Insurance

Given the investment horizon of 90 days NI Holdings is expected to generate 0.74 times more return on investment than Goosehead Insurance. However, NI Holdings is 1.35 times less risky than Goosehead Insurance. It trades about -0.38 of its potential returns per unit of risk. Goosehead Insurance is currently generating about -0.37 per unit of risk. If you would invest  1,691  in NI Holdings on October 10, 2024 and sell it today you would lose (178.00) from holding NI Holdings or give up 10.53% of portfolio value over 90 days.

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

NI Holdings  vs.  Goosehead Insurance

NI Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, NI Holdings is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Goosehead Insurance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goosehead Insurance are ranked lower than 8 (%) 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.

Pair Trading with NI Holdings and Goosehead Insurance

The main advantage of trading using opposite NI Holdings and Goosehead Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NI Holdings 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 NI Holdings 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.