Correlation Between NAPCO Security and Geo

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

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

Diversification Opportunities for NAPCO Security and Geo

0.63

Correlation Coefficient

NAPCO Security  Geo

Poor diversification

The 3 months correlation between NAPCO and Geo is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding NAPCO Security Technologies and Geo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geo Group and NAPCO Security 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 NAPCO Security Technologies 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 NAPCO Security i.e., NAPCO Security and Geo go up and down completely randomly.

Pair Corralation between NAPCO Security and Geo

Given the investment horizon of 90 days NAPCO Security Technologies is expected to under-perform the Geo. In addition to that, NAPCO Security is 1.14 times more volatile than Geo Group. It trades about -0.14 of its total potential returns per unit of risk. Geo Group is currently generating about 0.03 per unit of volatility. If you would invest  2,829  in Geo Group on December 26, 2024 and sell it today you would earn a total of  74.00  from holding Geo Group or generate 2.62% return on investment over 90 days.

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

NAPCO Security Technologies  vs.  Geo Group

NAPCO Security Techn

Risk-Adjusted Performance

Very Weak

Over the last 90 days NAPCO Security Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Geo Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Geo Group are ranked lower than 2 (%) 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 NAPCO Security and Geo

The main advantage of trading using opposite NAPCO Security and Geo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NAPCO Security 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 NAPCO Security Technologies 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.