Correlation Between GEO and LTC Properties

Can any of the company-specific risk be diversified away by investing in both GEO and LTC Properties 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 LTC Properties 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 LTC Properties, you can compare the effects of market volatilities on GEO and LTC Properties 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 LTC Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEO and LTC Properties.

Diversification Opportunities for GEO and LTC Properties

0.58

Correlation Coefficient

GEO  LTC Properties

Very weak diversification

The 3 months correlation between GEO and LTC is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding The GEO Group and LTC Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LTC Properties 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 LTC Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LTC Properties has no effect on the direction of GEO i.e., GEO and LTC Properties go up and down completely randomly.

Pair Corralation between GEO and LTC Properties

Assuming the 90 days horizon The GEO Group is expected to generate 2.17 times more return on investment than LTC Properties. However, GEO is 2.17 times more volatile than LTC Properties. It trades about 0.24 of its potential returns per unit of risk. LTC Properties is currently generating about -0.26 per unit of risk. If you would invest  2,643  in The GEO Group on October 12, 2024 and sell it today you would earn a total of  349.00  from holding The GEO Group or generate 13.2% return on investment over 90 days.

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

The GEO Group  vs.  LTC Properties

GEO Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The GEO Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, GEO reported solid returns over the last few months and may actually be approaching a breakup point.

LTC Properties

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LTC Properties are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, LTC Properties is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GEO and LTC Properties

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

The idea behind The GEO Group and LTC Properties 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.