Correlation Between Goosehead Insurance and British American
Can any of the company-specific risk be diversified away by investing in both Goosehead Insurance and British American 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 British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Goosehead Insurance and British American Tobacco, you can compare the effects of market volatilities on Goosehead Insurance and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goosehead Insurance and British American.
Diversification Opportunities for Goosehead Insurance and British American
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Goosehead and British is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and British American go up and down completely randomly.
Pair Corralation between Goosehead Insurance and British American
Assuming the 90 days trading horizon Goosehead Insurance is expected to generate 2.85 times more return on investment than British American. However, Goosehead Insurance is 2.85 times more volatile than British American Tobacco. It trades about 0.08 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.08 per unit of risk. If you would invest 5,500 in Goosehead Insurance on August 29, 2024 and sell it today you would earn a total of 6,570 from holding Goosehead Insurance or generate 119.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goosehead Insurance vs. British American Tobacco
Performance |
| Timeline |
| Goosehead Insurance |
| British American Tobacco |
Goosehead Insurance and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goosehead Insurance and British American
The main advantage of trading using opposite Goosehead Insurance and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goosehead Insurance position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Goosehead Insurance vs. Apple Inc | Goosehead Insurance vs. Apple Inc | Goosehead Insurance vs. Apple Inc | Goosehead Insurance vs. Apple Inc |
| British American vs. Philip Morris International | British American vs. Philip Morris International | British American vs. British American Tobacco | British American vs. British American Tobacco |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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