Correlation Between NL Industries and Geo

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

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

Diversification Opportunities for NL Industries and Geo

0.51

Correlation Coefficient

NL Industries  Geo

Very weak diversification

The 3 months correlation between NL Industries and Geo is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Geo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geo Group and NL Industries 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 NL Industries 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 NL Industries i.e., NL Industries and Geo go up and down completely randomly.

Pair Corralation between NL Industries and Geo

Allowing for the 90-day total investment horizon NL Industries is expected to generate 1.97 times less return on investment than Geo. But when comparing it to its historical volatility, NL Industries is 1.04 times less risky than Geo. It trades about 0.02 of its potential returns per unit of risk. Geo Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,754  in Geo Group on December 28, 2024 and sell it today you would earn a total of  148.00  from holding Geo Group or generate 5.37% return on investment over 90 days.

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

NL Industries  vs.  Geo Group

NL Industries

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, NL Industries is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Geo Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Geo Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Geo may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NL Industries and Geo

The main advantage of trading using opposite NL Industries and Geo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries 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 NL Industries and 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.