Correlation Between All American and Geo

Can any of the company-specific risk be diversified away by investing in both All American 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 All American and Geo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between All American Pet and Geo Group, you can compare the effects of market volatilities on All American 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 All American with a short position of Geo. Check out your portfolio center. Please also check ongoing floating volatility patterns of All American and Geo.

Diversification Opportunities for All American and Geo

0.0

Correlation Coefficient

All American  Geo

Pay attention - limited upside

The 3 months correlation between All and Geo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding All American Pet and Geo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geo Group and All American 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 All American Pet 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 All American i.e., All American and Geo go up and down completely randomly.

Pair Corralation between All American and Geo

Given the investment horizon of 90 days All American Pet is expected to generate 15.97 times more return on investment than Geo. However, All American is 15.97 times more volatile than Geo Group. It trades about 0.08 of its potential returns per unit of risk. Geo Group is currently generating about 0.07 per unit of risk. If you would invest  0.04  in All American Pet on September 26, 2024 and sell it today you would lose (0.03) from holding All American Pet or give up 75.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

All American Pet  vs.  Geo Group

All American Pet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days All American Pet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, All American is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Geo Group

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Geo Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Geo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with All American and Geo

The main advantage of trading using opposite All American and Geo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if All American 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.

The idea behind All American Pet and Geo Group 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.