Correlation Between EverQuote and Gaia

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

By analyzing existing cross correlation between EverQuote Class A and Gaia Inc, you can compare the effects of market volatilities on EverQuote and Gaia 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 EverQuote with a short position of Gaia. Check out your portfolio center. Please also check ongoing floating volatility patterns of EverQuote and Gaia.

Diversification Opportunities for EverQuote and Gaia

0.59

Correlation Coefficient

EverQuote  Gaia

Very weak diversification

The 3 months correlation between EverQuote and Gaia is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding EverQuote Class A and Gaia Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaia Inc and EverQuote 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 EverQuote Class A are associated (or correlated) with Gaia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaia Inc has no effect on the direction of EverQuote i.e., EverQuote and Gaia go up and down completely randomly.

Pair Corralation between EverQuote and Gaia

Given the investment horizon of 90 days EverQuote is expected to generate 2.8 times less return on investment than Gaia. In addition to that, EverQuote is 1.08 times more volatile than Gaia Inc. It trades about 0.07 of its total potential returns per unit of risk. Gaia Inc is currently generating about 0.21 per unit of volatility. If you would invest  296.00  in Gaia Inc on January 27, 2024 and sell it today you would earn a total of  99.00  from holding Gaia Inc or generate 33.45% return on investment over 90 days.

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

EverQuote Class A  vs.  Gaia Inc

EverQuote Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EverQuote Class A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, EverQuote reported solid returns over the last few months and may actually be approaching a breakup point.

Gaia Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gaia Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Gaia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EverQuote and Gaia

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

The idea behind EverQuote Class A and Gaia Inc 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.