Correlation Between Geo and CoreCivic
Can any of the company-specific risk be diversified away by investing in both Geo and CoreCivic 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 CoreCivic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Geo Group and CoreCivic, you can compare the effects of market volatilities on Geo and CoreCivic 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 CoreCivic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geo and CoreCivic.
Diversification Opportunities for Geo and CoreCivic
No risk reduction
The 3 months correlation between Geo and CoreCivic is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Geo Group and CoreCivic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoreCivic 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 Geo Group are associated (or correlated) with CoreCivic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CoreCivic has no effect on the direction of Geo i.e., Geo and CoreCivic go up and down completely randomly.
Pair Corralation between Geo and CoreCivic
Considering the 90-day investment horizon Geo Group is expected to generate 1.11 times more return on investment than CoreCivic. However, Geo is 1.11 times more volatile than CoreCivic. It trades about 0.07 of its potential returns per unit of risk. CoreCivic is currently generating about 0.06 per unit of risk. If you would invest 1,088 in Geo Group on September 2, 2024 and sell it today you would earn a total of 1,763 from holding Geo Group or generate 162.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Geo Group vs. CoreCivic
Performance |
| Timeline |
| Geo Group |
| CoreCivic |
Geo and CoreCivic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Geo and CoreCivic
The main advantage of trading using opposite Geo and CoreCivic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Geo position performs unexpectedly, CoreCivic 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 CoreCivic will offset losses from the drop in CoreCivic's long position.The idea behind Geo Group and CoreCivic 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.| CoreCivic vs. ADT Inc | CoreCivic vs. NL Industries | CoreCivic vs. Mistras Group | CoreCivic vs. Evolv Technologies Holdings |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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