Correlation Between Goosehead Insurance and American Electric
Can any of the company-specific risk be diversified away by investing in both Goosehead Insurance and American Electric 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 Electric 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 Electric Power, you can compare the effects of market volatilities on Goosehead Insurance and American Electric 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 Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goosehead Insurance and American Electric.
Diversification Opportunities for Goosehead Insurance and American Electric
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Goosehead and American is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and American Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Electric Power 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 Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Electric Power has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and American Electric go up and down completely randomly.
Pair Corralation between Goosehead Insurance and American Electric
Assuming the 90 days trading horizon Goosehead Insurance is expected to generate 2.57 times more return on investment than American Electric. However, Goosehead Insurance is 2.57 times more volatile than American Electric Power. It trades about 0.09 of its potential returns per unit of risk. American Electric Power is currently generating about 0.02 per unit of risk. If you would invest 3,708 in Goosehead Insurance on September 12, 2024 and sell it today you would earn a total of 8,032 from holding Goosehead Insurance or generate 216.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Goosehead Insurance vs. American Electric Power
Performance |
| Timeline |
| Goosehead Insurance |
| American Electric Power |
Goosehead Insurance and American Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goosehead Insurance and American Electric
The main advantage of trading using opposite Goosehead Insurance and American Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goosehead Insurance position performs unexpectedly, American Electric 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 Electric will offset losses from the drop in American Electric's long position.| Goosehead Insurance vs. Apple Inc | Goosehead Insurance vs. Apple Inc | Goosehead Insurance vs. Apple Inc | Goosehead Insurance vs. Apple Inc |
| American Electric vs. Zurich Insurance Group | American Electric vs. Gaztransport Technigaz SA | American Electric vs. BII Railway Transportation | American Electric 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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