Correlation Between Supercom and Geo

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

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

Diversification Opportunities for Supercom and Geo

-0.19

Correlation Coefficient

Supercom  Geo

Good diversification

The 3 months correlation between Supercom and Geo is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Supercom and Geo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geo Group and Supercom 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 Supercom 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 Supercom i.e., Supercom and Geo go up and down completely randomly.

Pair Corralation between Supercom and Geo

Given the investment horizon of 90 days Supercom is expected to under-perform the Geo. In addition to that, Supercom is 1.19 times more volatile than Geo Group. It trades about -0.01 of its total potential returns per unit of risk. Geo Group is currently generating about 0.1 per unit of volatility. If you would invest  1,503  in Geo Group on September 24, 2024 and sell it today you would earn a total of  1,248  from holding Geo Group or generate 83.03% return on investment over 90 days.

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

Supercom  vs.  Geo Group

Supercom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Supercom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Supercom is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Geo Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Geo Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Geo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Supercom and Geo

The main advantage of trading using opposite Supercom and Geo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Supercom 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 Supercom 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.