Correlation Between Dow Jones and GEO
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and GEO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and The GEO Group, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of GEO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and GEO.
Diversification Opportunities for Dow Jones and GEO
Poor diversification
The 3 months correlation between Dow and GEO is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and The GEO Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEO Group and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and GEO go up and down completely randomly.
Pair Corralation between Dow Jones and GEO
Assuming the 90 days trading horizon Dow Jones is expected to generate 19.83 times less return on investment than GEO. But when comparing it to its historical volatility, Dow Jones Industrial is 9.0 times less risky than GEO. It trades about 0.14 of its potential returns per unit of risk. The GEO Group is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 1,135 in The GEO Group on August 25, 2024 and sell it today you would earn a total of 1,607 from holding The GEO Group or generate 141.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. The GEO Group
Performance |
| Timeline |
Dow Jones and GEO Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
The GEO Group
Pair trading matchups for GEO
Pair Trading with Dow Jones and GEO
The main advantage of trading using opposite Dow Jones and GEO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
| GEO vs. Welltower | GEO vs. Medical Properties Trust | GEO vs. Sabra Health Care | GEO vs. National Health Investors |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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