Correlation Between Geo and MSA Safety

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

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

Diversification Opportunities for Geo and MSA Safety

0.11

Correlation Coefficient

Geo  MSA Safety

Average diversification

The 3 months correlation between Geo and MSA is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Geo Group and MSA Safety in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSA Safety 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 MSA Safety. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSA Safety has no effect on the direction of Geo i.e., Geo and MSA Safety go up and down completely randomly.

Pair Corralation between Geo and MSA Safety

Considering the 90-day investment horizon Geo Group is expected to generate 2.84 times more return on investment than MSA Safety. However, Geo is 2.84 times more volatile than MSA Safety. It trades about 0.12 of its potential returns per unit of risk. MSA Safety is currently generating about 0.03 per unit of risk. If you would invest  860.00  in Geo Group on September 26, 2024 and sell it today you would earn a total of  1,941  from holding Geo Group or generate 225.7% return on investment over 90 days.

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

Geo Group  vs.  MSA Safety

Geo Group

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Geo Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Geo displayed solid returns over the last few months and may actually be approaching a breakup point.

MSA Safety

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MSA Safety has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Geo and MSA Safety

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

The idea behind Geo Group and MSA Safety 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.