Correlation Between Goosehead Insurance and WILLIS LEASE

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

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

Diversification Opportunities for Goosehead Insurance and WILLIS LEASE

0.85

Correlation Coefficient

Goosehead Insurance  WILLIS LEASE

Very poor diversification

The 3 months correlation between Goosehead and WILLIS is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Goosehead Insurance and WILLIS LEASE FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WILLIS LEASE FIN 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 WILLIS LEASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WILLIS LEASE FIN has no effect on the direction of Goosehead Insurance i.e., Goosehead Insurance and WILLIS LEASE go up and down completely randomly.

Pair Corralation between Goosehead Insurance and WILLIS LEASE

Assuming the 90 days trading horizon Goosehead Insurance is expected to generate 1.75 times less return on investment than WILLIS LEASE. But when comparing it to its historical volatility, Goosehead Insurance is 1.81 times less risky than WILLIS LEASE. It trades about 0.21 of its potential returns per unit of risk. WILLIS LEASE FIN is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  11,786  in WILLIS LEASE FIN on September 20, 2024 and sell it today you would earn a total of  8,214  from holding WILLIS LEASE FIN or generate 69.69% return on investment over 90 days.

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

Goosehead Insurance  vs.  WILLIS LEASE FIN

Goosehead Insurance

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goosehead Insurance are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Goosehead Insurance unveiled solid returns over the last few months and may actually be approaching a breakup point.

WILLIS LEASE FIN

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WILLIS LEASE FIN are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WILLIS LEASE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goosehead Insurance and WILLIS LEASE

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

The idea behind Goosehead Insurance and WILLIS LEASE FIN 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.