Correlation Between GEO and Universal Health

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

Diversification Opportunities for GEO and Universal Health

-0.55

Correlation Coefficient

GEO  Universal Health

Excellent diversification

The 3 months correlation between GEO and Universal is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding The GEO Group and Universal Health Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Health Realty 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 Universal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Health Realty has no effect on the direction of GEO i.e., GEO and Universal Health go up and down completely randomly.

Pair Corralation between GEO and Universal Health

Assuming the 90 days horizon GEO is expected to generate 1.71 times less return on investment than Universal Health. In addition to that, GEO is 3.0 times more volatile than Universal Health Realty. It trades about 0.02 of its total potential returns per unit of risk. Universal Health Realty is currently generating about 0.12 per unit of volatility. If you would invest  3,425  in Universal Health Realty on December 26, 2024 and sell it today you would earn a total of  306.00  from holding Universal Health Realty or generate 8.93% 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.  Universal Health Realty

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.

Universal Health Realty

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Health Realty are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Universal Health may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GEO and Universal Health

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

The idea behind The GEO Group and Universal Health Realty 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.