Correlation Between LTC Properties and GEO
Can any of the company-specific risk be diversified away by investing in both LTC Properties 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 LTC Properties and GEO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LTC Properties and The GEO Group, you can compare the effects of market volatilities on LTC Properties 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 LTC Properties with a short position of GEO. Check out your portfolio center. Please also check ongoing floating volatility patterns of LTC Properties and GEO.
Diversification Opportunities for LTC Properties and GEO
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between LTC and GEO is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding LTC Properties and The GEO Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEO Group and LTC Properties 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 LTC Properties 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 LTC Properties i.e., LTC Properties and GEO go up and down completely randomly.
Pair Corralation between LTC Properties and GEO
Assuming the 90 days horizon LTC Properties is expected to generate 5.74 times less return on investment than GEO. But when comparing it to its historical volatility, LTC Properties is 2.41 times less risky than GEO. It trades about 0.03 of its potential returns per unit of risk. The GEO Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,126 in The GEO Group on August 25, 2024 and sell it today you would earn a total of 1,616 from holding The GEO Group or generate 143.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
LTC Properties vs. The GEO Group
Performance |
| Timeline |
| LTC Properties |
| GEO Group |
LTC Properties and GEO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LTC Properties and GEO
The main advantage of trading using opposite LTC Properties and GEO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LTC Properties 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.| LTC Properties vs. Welltower | LTC Properties vs. Medical Properties Trust | LTC Properties vs. Sabra Health Care | LTC Properties vs. National Health Investors |
| 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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