Correlation Between CONSTELLATION and Goosehead Insurance

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

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

Diversification Opportunities for CONSTELLATION and Goosehead Insurance

-0.35

Correlation Coefficient

CONSTELLATION  Goosehead Insurance

Very good diversification

The 3 months correlation between CONSTELLATION and Goosehead is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding CONSTELLATION BRANDS INC and Goosehead Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goosehead Insurance and CONSTELLATION 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 CONSTELLATION BRANDS INC 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 CONSTELLATION i.e., CONSTELLATION and Goosehead Insurance go up and down completely randomly.

Pair Corralation between CONSTELLATION and Goosehead Insurance

Assuming the 90 days trading horizon CONSTELLATION BRANDS INC is expected to generate 0.77 times more return on investment than Goosehead Insurance. However, CONSTELLATION BRANDS INC is 1.3 times less risky than Goosehead Insurance. It trades about -0.19 of its potential returns per unit of risk. Goosehead Insurance is currently generating about -0.33 per unit of risk. If you would invest  8,724  in CONSTELLATION BRANDS INC on October 8, 2024 and sell it today you would lose (250.00) from holding CONSTELLATION BRANDS INC or give up 2.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	57.89%
Values	Daily Returns

CONSTELLATION BRANDS INC  vs.  Goosehead Insurance

CONSTELLATION BRANDS INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONSTELLATION BRANDS INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CONSTELLATION BRANDS INC investors.

Goosehead Insurance

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goosehead Insurance are ranked lower than 10 (%) 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 CONSTELLATION and Goosehead Insurance

The main advantage of trading using opposite CONSTELLATION and Goosehead Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CONSTELLATION 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 CONSTELLATION BRANDS INC 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.