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
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between GEO and National is 0.15. 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 4.72 times more return on investment than National Health. However, GEO is 4.72 times more volatile than National Health Investors. It trades about 0.29 of its potential returns per unit of risk. National Health Investors is currently generating about -0.03 per unit of risk. If you would invest 1,154 in The GEO Group on August 29, 2024 and sell it today you would earn a total of 1,483 from holding The GEO Group or generate 128.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The GEO Group vs. National Health Investors
Performance |
| Timeline |
| GEO Group |
| National Health Investors |
GEO and National Health Volatility Contrast
Predicted Return Density |
| Returns |
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.| GEO vs. Sabra Health Care | GEO vs. Superior Plus Corp | GEO vs. NMI Holdings | GEO vs. SIVERS SEMICONDUCTORS AB |
| National Health vs. Seven West Media | National Health vs. Goosehead Insurance | National Health vs. QBE Insurance Group | National Health vs. Zurich Insurance Group |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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