Correlation Between Geo and SSC Security

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

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

Diversification Opportunities for Geo and SSC Security

0.61

Correlation Coefficient

Geo  SSC Security

Poor diversification

The 3 months correlation between Geo and SSC is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Geo Group and SSC Security Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSC Security Services 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 SSC Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSC Security Services has no effect on the direction of Geo i.e., Geo and SSC Security go up and down completely randomly.

Pair Corralation between Geo and SSC Security

Considering the 90-day investment horizon Geo Group is expected to generate 0.78 times more return on investment than SSC Security. However, Geo Group is 1.28 times less risky than SSC Security. It trades about 0.1 of its potential returns per unit of risk. SSC Security Services is currently generating about 0.02 per unit of risk. If you would invest  1,503  in Geo Group on September 24, 2024 and sell it today you would earn a total of  1,248  from holding Geo Group or generate 83.03% return on investment over 90 days.

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

Geo Group  vs.  SSC Security Services

Geo Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Geo Group are ranked lower than 17 (%) 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.

SSC Security Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SSC Security Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SSC Security is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Geo and SSC Security

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

The idea behind Geo Group and SSC Security Services 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.