Correlation Between Geo and Liberty Defense

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

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

Diversification Opportunities for Geo and Liberty Defense

-0.91

Correlation Coefficient

Geo  Liberty Defense

Pay attention - limited upside

The 3 months correlation between Geo and Liberty is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Geo Group and Liberty Defense Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Defense Holdings 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 Geo Group are associated (or correlated) with Liberty Defense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Defense Holdings has no effect on the direction of Geo i.e., Geo and Liberty Defense go up and down completely randomly.

Pair Corralation between Geo and Liberty Defense

Considering the 90-day investment horizon Geo Group is expected to generate 0.81 times more return on investment than Liberty Defense. However, Geo Group is 1.23 times less risky than Liberty Defense. It trades about 0.21 of its potential returns per unit of risk. Liberty Defense Holdings is currently generating about -0.08 per unit of risk. If you would invest  1,307  in Geo Group on September 4, 2024 and sell it today you would earn a total of  1,388  from holding Geo Group or generate 106.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Geo Group  vs.  Liberty Defense Holdings

Geo Group

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Geo Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Geo displayed solid returns over the last few months and may actually be approaching a breakup point.

Liberty Defense Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Defense Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Geo and Liberty Defense

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

The idea behind Geo Group and Liberty Defense Holdings 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.