Correlation Between GEO and Sabra Health

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

Diversification Opportunities for GEO and Sabra Health

0.39

Correlation Coefficient

GEO  Sabra Health

Weak diversification

The 3 months correlation between GEO and Sabra is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding The GEO Group and Sabra Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabra Health Care 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 Sabra Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabra Health Care has no effect on the direction of GEO i.e., GEO and Sabra Health go up and down completely randomly.

Pair Corralation between GEO and Sabra Health

Assuming the 90 days horizon The GEO Group is expected to generate 1.98 times more return on investment than Sabra Health. However, GEO is 1.98 times more volatile than Sabra Health Care. It trades about 0.04 of its potential returns per unit of risk. Sabra Health Care is currently generating about 0.0 per unit of risk. If you would invest  2,636  in The GEO Group on December 28, 2024 and sell it today you would earn a total of  113.00  from holding The GEO Group or generate 4.29% return on investment over 90 days.

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

The GEO Group  vs.  Sabra Health Care

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 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, GEO may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sabra Health Care

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sabra Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sabra Health 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 Sabra Health

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

The idea behind The GEO Group and Sabra Health Care 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.