Correlation Between Whirlpool and Goosehead Insurance

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

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

Diversification Opportunities for Whirlpool and Goosehead Insurance

-0.09

Correlation Coefficient

Whirlpool  Goosehead Insurance

Good diversification

The 3 months correlation between Whirlpool and Goosehead is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Whirlpool and Goosehead Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goosehead Insurance and Whirlpool 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 Whirlpool 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 Whirlpool i.e., Whirlpool and Goosehead Insurance go up and down completely randomly.

Pair Corralation between Whirlpool and Goosehead Insurance

Assuming the 90 days horizon Whirlpool is expected to generate 0.72 times more return on investment than Goosehead Insurance. However, Whirlpool is 1.39 times less risky than Goosehead Insurance. It trades about 0.34 of its potential returns per unit of risk. Goosehead Insurance is currently generating about 0.14 per unit of risk. If you would invest  11,080  in Whirlpool on October 20, 2024 and sell it today you would earn a total of  1,385  from holding Whirlpool or generate 12.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Whirlpool  vs.  Goosehead Insurance

Whirlpool

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Whirlpool are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Whirlpool reported solid returns over the last few months and may actually be approaching a breakup point.

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 comparatively fragile basic indicators, Goosehead Insurance unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Whirlpool and Goosehead Insurance

The main advantage of trading using opposite Whirlpool and Goosehead Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Whirlpool 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 Whirlpool 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.