Correlation Between GEO and Welltower

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

By analyzing existing cross correlation between The GEO Group and Welltower, you can compare the effects of market volatilities on GEO and Welltower 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 Welltower. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEO and Welltower.

Diversification Opportunities for GEO and Welltower

-0.53

Correlation Coefficient

GEO  Welltower

Excellent diversification

The 3 months correlation between GEO and Welltower is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding The GEO Group and Welltower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welltower 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 The GEO Group are associated (or correlated) with Welltower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Welltower has no effect on the direction of GEO i.e., GEO and Welltower go up and down completely randomly.

Pair Corralation between GEO and Welltower

Assuming the 90 days horizon GEO is expected to generate 2.64 times less return on investment than Welltower. In addition to that, GEO is 2.52 times more volatile than Welltower. It trades about 0.02 of its total potential returns per unit of risk. Welltower is currently generating about 0.15 per unit of volatility. If you would invest  11,972  in Welltower on December 26, 2024 and sell it today you would earn a total of  1,698  from holding Welltower or generate 14.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

The GEO Group  vs.  Welltower

GEO Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The GEO Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, GEO is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Welltower

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Welltower are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Welltower reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GEO and Welltower

The main advantage of trading using opposite GEO and Welltower positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEO position performs unexpectedly, Welltower 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 Welltower will offset losses from the drop in Welltower's long position.

The idea behind The GEO Group and Welltower 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.