Correlation Between Goosehead Insurance and Choice Hotels

Can any of the company-specific risk be diversified away by investing in both Goosehead Insurance and Choice Hotels 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 Choice Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Goosehead Insurance and Choice Hotels International, you can compare the effects of market volatilities on Goosehead Insurance and Choice Hotels 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 Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goosehead Insurance and Choice Hotels.

Diversification Opportunities for Goosehead Insurance and Choice Hotels

0.97

Correlation Coefficient

Goosehead Insurance  Choice Hotels

Almost no diversification

The 3 months correlation between Goosehead and Choice is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and Choice Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Hotels Intern 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 Choice Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Hotels Intern has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and Choice Hotels go up and down completely randomly.

Pair Corralation between Goosehead Insurance and Choice Hotels

Assuming the 90 days trading horizon Goosehead Insurance is expected to generate 1.59 times more return on investment than Choice Hotels. However, Goosehead Insurance is 1.59 times more volatile than Choice Hotels International. It trades about 0.29 of its potential returns per unit of risk. Choice Hotels International is currently generating about 0.26 per unit of risk. If you would invest  7,590  in Goosehead Insurance on September 12, 2024 and sell it today you would earn a total of  4,150  from holding Goosehead Insurance or generate 54.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Goosehead Insurance  vs.  Choice Hotels International

Goosehead Insurance

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goosehead Insurance are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Goosehead Insurance unveiled solid returns over the last few months and may actually be approaching a breakup point.

Choice Hotels Intern

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Choice Hotels International are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Choice Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goosehead Insurance and Choice Hotels

The main advantage of trading using opposite Goosehead Insurance and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goosehead Insurance position performs unexpectedly, Choice Hotels 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 Choice Hotels will offset losses from the drop in Choice Hotels' long position.

The idea behind Goosehead Insurance and Choice Hotels International 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.