Correlation Between National Health and GEO

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

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

Diversification Opportunities for National Health and GEO

0.0

Correlation Coefficient

National Health  GEO

Pay attention - limited upside

The 3 months correlation between National and GEO is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and The GEO Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEO Group and National Health 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 National Health Investors 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 National Health i.e., National Health and GEO go up and down completely randomly.

Pair Corralation between National Health and GEO

Assuming the 90 days horizon National Health Investors is expected to under-perform the GEO. But the stock apears to be less risky and, when comparing its historical volatility, National Health Investors is 4.24 times less risky than GEO. The stock trades about -0.05 of its potential returns per unit of risk. The The GEO Group is currently generating about 0.24 of returns per unit of risk over similar time horizon. 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

National Health Investors  vs.  The GEO Group

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.

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.

Pair Trading with National Health and GEO

The main advantage of trading using opposite National Health and GEO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health 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 National Health Investors and The 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.