Correlation Between GEO and Medical Properties

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

By analyzing existing cross correlation between The GEO Group and Medical Properties Trust, you can compare the effects of market volatilities on GEO and Medical Properties 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 GEO with a short position of Medical Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEO and Medical Properties.

Diversification Opportunities for GEO and Medical Properties

-0.59

Correlation Coefficient

GEO  Medical Properties

Excellent diversification

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

Pair Corralation between GEO and Medical Properties

Assuming the 90 days horizon The GEO Group is expected to generate 1.35 times more return on investment than Medical Properties. However, GEO is 1.35 times more volatile than Medical Properties Trust. It trades about 0.22 of its potential returns per unit of risk. Medical Properties Trust is currently generating about 0.03 per unit of risk. If you would invest  1,170  in The GEO Group on September 4, 2024 and sell it today you would earn a total of  1,388  from holding The GEO Group or generate 118.63% return on investment over 90 days.

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

The GEO Group  vs.  Medical Properties Trust

GEO Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The GEO Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GEO reported solid returns over the last few months and may actually be approaching a breakup point.

Medical Properties Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Properties Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Medical Properties may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GEO and Medical Properties

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

The idea behind The GEO Group and Medical Properties Trust 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.