Correlation Between Fundamental Global and Goosehead Insurance

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

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

Diversification Opportunities for Fundamental Global and Goosehead Insurance

0.46

Correlation Coefficient

Fundamental Global  Goosehead Insurance

Very weak diversification

The 3 months correlation between Fundamental and Goosehead is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Global and Goosehead Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goosehead Insurance and Fundamental Global 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 Fundamental Global 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 Fundamental Global i.e., Fundamental Global and Goosehead Insurance go up and down completely randomly.

Pair Corralation between Fundamental Global and Goosehead Insurance

Assuming the 90 days horizon Fundamental Global is expected to generate 2.3 times less return on investment than Goosehead Insurance. In addition to that, Fundamental Global is 1.12 times more volatile than Goosehead Insurance. It trades about 0.11 of its total potential returns per unit of risk. Goosehead Insurance is currently generating about 0.27 per unit of volatility. If you would invest  8,378  in Goosehead Insurance on September 2, 2024 and sell it today you would earn a total of  4,234  from holding Goosehead Insurance or generate 50.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Fundamental Global  vs.  Goosehead Insurance

Fundamental Global

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fundamental Global are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Fundamental Global reported solid returns over the last few months and may actually be approaching a breakup point.

Goosehead Insurance

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goosehead Insurance are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical indicators, Goosehead Insurance exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fundamental Global and Goosehead Insurance

The main advantage of trading using opposite Fundamental Global and Goosehead Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fundamental Global 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 Fundamental Global 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.