Correlation Between PT Adaro and Goosehead Insurance

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

By analyzing existing cross correlation between PT Adaro Energy and Goosehead Insurance, you can compare the effects of market volatilities on PT Adaro 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 PT Adaro with a short position of Goosehead Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Adaro and Goosehead Insurance.

Diversification Opportunities for PT Adaro and Goosehead Insurance

-0.57

Correlation Coefficient

PT Adaro  Goosehead Insurance

Excellent diversification

The 3 months correlation between A64 and Goosehead is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding PT Adaro Energy and Goosehead Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goosehead Insurance and PT Adaro 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 PT Adaro Energy 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 PT Adaro i.e., PT Adaro and Goosehead Insurance go up and down completely randomly.

Pair Corralation between PT Adaro and Goosehead Insurance

Assuming the 90 days horizon PT Adaro Energy is expected to under-perform the Goosehead Insurance. In addition to that, PT Adaro is 2.91 times more volatile than Goosehead Insurance. It trades about -0.04 of its total potential returns per unit of risk. Goosehead Insurance is currently generating about 0.21 per unit of volatility. If you would invest  7,964  in Goosehead Insurance on September 19, 2024 and sell it today you would earn a total of  2,926  from holding Goosehead Insurance or generate 36.74% return on investment over 90 days.

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

PT Adaro Energy  vs.  Goosehead Insurance

PT Adaro Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Adaro Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 uncertain basic indicators, Goosehead Insurance unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Adaro and Goosehead Insurance

The main advantage of trading using opposite PT Adaro and Goosehead Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Adaro 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 PT Adaro Energy 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.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.