Correlation Between Medical Properties and GEO

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

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

Diversification Opportunities for Medical Properties and GEO

-0.56

Correlation Coefficient

Medical Properties  GEO

Excellent diversification

The 3 months correlation between Medical and GEO is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Medical Properties Trust and The GEO Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEO Group and Medical 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 Medical Properties Trust 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 Medical Properties i.e., Medical Properties and GEO go up and down completely randomly.

Pair Corralation between Medical Properties and GEO

Assuming the 90 days horizon Medical Properties Trust is expected to generate 0.96 times more return on investment than GEO. However, Medical Properties Trust is 1.04 times less risky than GEO. It trades about 0.23 of its potential returns per unit of risk. The GEO Group is currently generating about 0.04 per unit of risk. If you would invest  350.00  in Medical Properties Trust on December 28, 2024 and sell it today you would earn a total of  219.00  from holding Medical Properties Trust or generate 62.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Medical Properties Trust  vs.  The GEO Group

Medical Properties Trust

Risk-Adjusted Performance

Solid

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

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 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, GEO may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Medical Properties and GEO

The main advantage of trading using opposite Medical Properties and GEO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medical 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 Medical Properties Trust 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.