Correlation Between Goosehead Insurance and Carsales
Can any of the company-specific risk be diversified away by investing in both Goosehead Insurance and Carsales 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 Carsales into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Goosehead Insurance and CarsalesCom, you can compare the effects of market volatilities on Goosehead Insurance and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goosehead Insurance and Carsales.
Diversification Opportunities for Goosehead Insurance and Carsales
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Goosehead and Carsales is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and Carsales go up and down completely randomly.
Pair Corralation between Goosehead Insurance and Carsales
Assuming the 90 days trading horizon Goosehead Insurance is expected to generate 1.77 times more return on investment than Carsales. However, Goosehead Insurance is 1.77 times more volatile than CarsalesCom. It trades about 0.3 of its potential returns per unit of risk. CarsalesCom is currently generating about 0.14 per unit of risk. If you would invest 7,634 in Goosehead Insurance on August 28, 2024 and sell it today you would earn a total of 4,451 from holding Goosehead Insurance or generate 58.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goosehead Insurance vs. CarsalesCom
Performance |
| Timeline |
| Goosehead Insurance |
| CarsalesCom |
Goosehead Insurance and Carsales Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goosehead Insurance and Carsales
The main advantage of trading using opposite Goosehead Insurance and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goosehead Insurance position performs unexpectedly, Carsales 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 Carsales will offset losses from the drop in Carsales' long position.| Goosehead Insurance vs. Apple Inc | Goosehead Insurance vs. Apple Inc | Goosehead Insurance vs. Apple Inc | Goosehead Insurance vs. Apple Inc |
| Carsales vs. CapitaLand Investment Limited | Carsales vs. Genco Shipping Trading | Carsales vs. MGIC INVESTMENT | Carsales vs. WisdomTree Investments |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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