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

0.25

Correlation Coefficient

NL Industries  Geo

Modest diversification

The 3 months correlation between NL Industries and Geo is 0.25. 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 under-perform the Geo. But the stock apears to be less risky and, when comparing its historical volatility, NL Industries is 1.06 times less risky than Geo. The stock trades about -0.08 of its potential returns per unit of risk. The Geo Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,712  in Geo Group on December 2, 2024 and sell it today you would earn a total of  24.00  from holding Geo Group or generate 0.88% return on investment over 90 days.

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

NL Industries  vs.  Geo Group

NL Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days NL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Geo Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Geo Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Geo is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.