Correlation Between GM and Goosehead Insurance
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Goosehead Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Goosehead Insurance, you can compare the effects of market volatilities on GM 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 GM with a short position of Goosehead Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Goosehead Insurance.
Diversification Opportunities for GM and Goosehead Insurance
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GM and Goosehead is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Goosehead Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goosehead Insurance and GM 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 General Motors 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 GM i.e., GM and Goosehead Insurance go up and down completely randomly.
Pair Corralation between GM and Goosehead Insurance
Allowing for the 90-day total investment horizon GM is expected to generate 2.99 times less return on investment than Goosehead Insurance. In addition to that, GM is 1.46 times more volatile than Goosehead Insurance. It trades about 0.12 of its total potential returns per unit of risk. Goosehead Insurance is currently generating about 0.52 per unit of volatility. If you would invest 9,908 in Goosehead Insurance on August 31, 2024 and sell it today you would earn a total of 2,407 from holding Goosehead Insurance or generate 24.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Goosehead Insurance
Performance |
| Timeline |
| General Motors |
| Goosehead Insurance |
GM and Goosehead Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Goosehead Insurance
The main advantage of trading using opposite GM and Goosehead Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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.| Goosehead Insurance vs. Apple Inc | Goosehead Insurance vs. Apple Inc | Goosehead Insurance vs. Apple Inc | Goosehead Insurance vs. Apple Inc |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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