Correlation Between GEO and National Health

Can any of the company-specific risk be diversified away by investing in both GEO and National Health 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 National Health 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 National Health Investors, you can compare the effects of market volatilities on GEO and National Health 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 National Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEO and National Health.

Diversification Opportunities for GEO and National Health

0.0

Correlation Coefficient

GEO  National Health

Pay attention - limited upside

The 3 months correlation between GEO and National is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding The GEO Group and National Health Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Health Investors 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 National Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Health Investors has no effect on the direction of GEO i.e., GEO and National Health go up and down completely randomly.

Pair Corralation between GEO and National Health

Assuming the 90 days horizon The GEO Group is expected to generate 4.24 times more return on investment than National Health. However, GEO is 4.24 times more volatile than National Health Investors. It trades about 0.24 of its potential returns per unit of risk. National Health Investors is currently generating about -0.05 per unit of risk. If you would invest  1,137  in The GEO Group on September 12, 2024 and sell it today you would earn a total of  1,528  from holding The GEO Group or generate 134.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

The GEO Group  vs.  National Health Investors

GEO Group

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The GEO Group are ranked lower than 18 (%) 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.

National Health Investors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Health Investors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, National Health is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GEO and National Health

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

The idea behind The GEO Group and National Health Investors 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.

Check out your portfolio center.

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.