Correlation Between RH and Goosehead Insurance

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

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

Diversification Opportunities for RH and Goosehead Insurance

-0.62

Correlation Coefficient

RH  Goosehead Insurance

Excellent diversification

The 3 months correlation between RH and Goosehead is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding RH and Goosehead Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goosehead Insurance and RH 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 RH 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 RH i.e., RH and Goosehead Insurance go up and down completely randomly.

Pair Corralation between RH and Goosehead Insurance

Allowing for the 90-day total investment horizon RH is expected to under-perform the Goosehead Insurance. In addition to that, RH is 1.03 times more volatile than Goosehead Insurance. It trades about -0.28 of its total potential returns per unit of risk. Goosehead Insurance is currently generating about 0.05 per unit of volatility. If you would invest  10,829  in Goosehead Insurance on December 17, 2024 and sell it today you would earn a total of  774.00  from holding Goosehead Insurance or generate 7.15% return on investment over 90 days.

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

RH  vs.  Goosehead Insurance

RH

Risk-Adjusted Performance

Very Weak

Over the last 90 days RH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Goosehead Insurance

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Goosehead Insurance are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical indicators, Goosehead Insurance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with RH and Goosehead Insurance

The main advantage of trading using opposite RH and Goosehead Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RH 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 RH 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.