Correlation Between LegalZoom and Geo

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

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

Diversification Opportunities for LegalZoom and Geo

0.87

Correlation Coefficient

LegalZoom  Geo

Very poor diversification

The 3 months correlation between LegalZoom and Geo is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding LegalZoom and Geo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geo Group and LegalZoom 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 LegalZoom are associated (or correlated) with Geo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geo Group has no effect on the direction of LegalZoom i.e., LegalZoom and Geo go up and down completely randomly.

Pair Corralation between LegalZoom and Geo

Allowing for the 90-day total investment horizon LegalZoom is expected to generate 7.15 times less return on investment than Geo. But when comparing it to its historical volatility, LegalZoom is 2.28 times less risky than Geo. It trades about 0.12 of its potential returns per unit of risk. Geo Group is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  1,445  in Geo Group on September 2, 2024 and sell it today you would earn a total of  1,406  from holding Geo Group or generate 97.3% return on investment over 90 days.

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

LegalZoom  vs.  Geo Group

LegalZoom

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LegalZoom are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, LegalZoom showed solid returns over the last few months and may actually be approaching a breakup point.

Geo Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Geo Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Geo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LegalZoom and Geo

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

The idea behind LegalZoom and Geo Group 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.