Correlation Between Geo and Resideo Technologies
Can any of the company-specific risk be diversified away by investing in both Geo and Resideo Technologies 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 Resideo Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Geo Group and Resideo Technologies, you can compare the effects of market volatilities on Geo and Resideo Technologies 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 Resideo Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geo and Resideo Technologies.
Diversification Opportunities for Geo and Resideo Technologies
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Geo and Resideo is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Geo Group and Resideo Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resideo Technologies 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 Resideo Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resideo Technologies has no effect on the direction of Geo i.e., Geo and Resideo Technologies go up and down completely randomly.
Pair Corralation between Geo and Resideo Technologies
Considering the 90-day investment horizon Geo Group is expected to generate 2.48 times more return on investment than Resideo Technologies. However, Geo is 2.48 times more volatile than Resideo Technologies. It trades about 0.16 of its potential returns per unit of risk. Resideo Technologies is currently generating about -0.03 per unit of risk. If you would invest 2,829 in Geo Group on November 3, 2024 and sell it today you would earn a total of 317.00 from holding Geo Group or generate 11.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Geo Group vs. Resideo Technologies
Performance |
| Timeline |
| Geo Group |
| Resideo Technologies |
Geo and Resideo Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Geo and Resideo Technologies
The main advantage of trading using opposite Geo and Resideo Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Geo position performs unexpectedly, Resideo Technologies 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 Resideo Technologies will offset losses from the drop in Resideo Technologies' long position.The idea behind Geo Group and Resideo Technologies 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.| Resideo Technologies vs. Allegion PLC | Resideo Technologies vs. MSA Safety | Resideo Technologies vs. NL Industries | Resideo Technologies vs. Brady |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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