Correlation Between Frontera and Geo

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

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

Diversification Opportunities for Frontera and Geo

0.0

Correlation Coefficient

Frontera  Geo

Pay attention - limited upside

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

Pair Corralation between Frontera and Geo

Given the investment horizon of 90 days Frontera Group is expected to generate 4.78 times more return on investment than Geo. However, Frontera is 4.78 times more volatile than Geo Group. It trades about 0.03 of its potential returns per unit of risk. Geo Group is currently generating about 0.07 per unit of risk. If you would invest  0.70  in Frontera Group on September 26, 2024 and sell it today you would lose (0.69) from holding Frontera Group or give up 98.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Frontera Group  vs.  Geo Group

Frontera Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frontera Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Frontera is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Frontera and Geo

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

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.