Correlation Between Exponent and CoreCivic

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

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

Diversification Opportunities for Exponent and CoreCivic

0.39

Correlation Coefficient

Exponent  CoreCivic

Weak diversification

The 3 months correlation between Exponent and CoreCivic is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Exponent and CoreCivic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoreCivic and Exponent 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 Exponent 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 Exponent i.e., Exponent and CoreCivic go up and down completely randomly.

Pair Corralation between Exponent and CoreCivic

Given the investment horizon of 90 days Exponent is expected to under-perform the CoreCivic. But the stock apears to be less risky and, when comparing its historical volatility, Exponent is 1.92 times less risky than CoreCivic. The stock trades about -0.09 of its potential returns per unit of risk. The CoreCivic is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,158  in CoreCivic on December 30, 2024 and sell it today you would lose (117.00) from holding CoreCivic or give up 5.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Exponent  vs.  CoreCivic

Exponent

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exponent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

CoreCivic

Risk-Adjusted Performance

Very Weak

Over the last 90 days CoreCivic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, CoreCivic is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Exponent and CoreCivic

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

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.