Correlation Between Goosehead Insurance and American Airlines
Can any of the company-specific risk be diversified away by investing in both Goosehead Insurance and American Airlines 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 Goosehead Insurance and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Goosehead Insurance and American Airlines Group, you can compare the effects of market volatilities on Goosehead Insurance and American Airlines 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 Goosehead Insurance with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goosehead Insurance and American Airlines.
Diversification Opportunities for Goosehead Insurance and American Airlines
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Goosehead and American is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Goosehead Insurance 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 Goosehead Insurance are associated (or correlated) with American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and American Airlines go up and down completely randomly.
Pair Corralation between Goosehead Insurance and American Airlines
Assuming the 90 days trading horizon Goosehead Insurance is expected to under-perform the American Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Goosehead Insurance is 2.5 times less risky than American Airlines. The stock trades about -0.06 of its potential returns per unit of risk. The American Airlines Group is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,351 in American Airlines Group on September 20, 2024 and sell it today you would earn a total of 187.00 from holding American Airlines Group or generate 13.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Goosehead Insurance vs. American Airlines Group
Performance |
| Timeline |
| Goosehead Insurance |
| American Airlines |
Goosehead Insurance and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goosehead Insurance and American Airlines
The main advantage of trading using opposite Goosehead Insurance and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goosehead Insurance position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| Goosehead Insurance vs. Aedas Homes SA | Goosehead Insurance vs. FUYO GENERAL LEASE | Goosehead Insurance vs. MOLSON RS BEVERAGE | Goosehead Insurance vs. Cal Maine Foods |
| American Airlines vs. REVO INSURANCE SPA | American Airlines vs. Lion One Metals | American Airlines vs. DISTRICT METALS | American Airlines vs. Goosehead Insurance |
Check out your portfolio center.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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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