Correlation Between Goosehead Insurance and CarMax
Can any of the company-specific risk be diversified away by investing in both Goosehead Insurance and CarMax 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 CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Goosehead Insurance and CarMax Inc, you can compare the effects of market volatilities on Goosehead Insurance and CarMax 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 CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goosehead Insurance and CarMax.
Diversification Opportunities for Goosehead Insurance and CarMax
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Goosehead and CarMax is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc 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 CarMax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarMax Inc has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and CarMax go up and down completely randomly.
Pair Corralation between Goosehead Insurance and CarMax
Given the investment horizon of 90 days Goosehead Insurance is expected to generate 1.69 times more return on investment than CarMax. However, Goosehead Insurance is 1.69 times more volatile than CarMax Inc. It trades about 0.08 of its potential returns per unit of risk. CarMax Inc is currently generating about 0.05 per unit of risk. If you would invest 7,720 in Goosehead Insurance on August 28, 2024 and sell it today you would earn a total of 4,863 from holding Goosehead Insurance or generate 62.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goosehead Insurance vs. CarMax Inc
Performance |
| Timeline |
| Goosehead Insurance |
| CarMax Inc |
Goosehead Insurance and CarMax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goosehead Insurance and CarMax
The main advantage of trading using opposite Goosehead Insurance and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goosehead Insurance position performs unexpectedly, CarMax 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 CarMax will offset losses from the drop in CarMax's long position.| Goosehead Insurance vs. Enstar Group Limited | Goosehead Insurance vs. Waterdrop ADR | Goosehead Insurance vs. Axa Equitable Holdings | Goosehead Insurance vs. Hartford Financial Services |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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