Correlation Between LTC Properties and GEO

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

By analyzing existing cross correlation between LTC Properties and The GEO Group, you can compare the effects of market volatilities on LTC Properties and GEO 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 LTC Properties with a short position of GEO. Check out your portfolio center. Please also check ongoing floating volatility patterns of LTC Properties and GEO.

Diversification Opportunities for LTC Properties and GEO

0.86

Correlation Coefficient

LTC Properties  GEO

Very poor diversification

The 3 months correlation between LTC and GEO is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding LTC Properties and The GEO Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEO Group and LTC Properties 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 LTC Properties are associated (or correlated) with GEO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEO Group has no effect on the direction of LTC Properties i.e., LTC Properties and GEO go up and down completely randomly.

Pair Corralation between LTC Properties and GEO

Assuming the 90 days horizon LTC Properties is expected to under-perform the GEO. But the stock apears to be less risky and, when comparing its historical volatility, LTC Properties is 3.31 times less risky than GEO. The stock trades about -0.48 of its potential returns per unit of risk. The The GEO Group is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,670  in The GEO Group on September 24, 2024 and sell it today you would lose (43.00) from holding The GEO Group or give up 1.61% of portfolio value over 90 days.

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

LTC Properties  vs.  The GEO Group

LTC Properties

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LTC Properties are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, LTC Properties is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

GEO Group

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The GEO Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GEO reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LTC Properties and GEO

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

The idea behind LTC Properties and The GEO Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.