Correlation Between Block and Geo

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

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

Diversification Opportunities for Block and Geo

0.95

Correlation Coefficient

Block  Geo

Almost no diversification

The 3 months correlation between Block and Geo is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc and Geo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geo Group and Block 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 Block Inc 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 Block i.e., Block and Geo go up and down completely randomly.

Pair Corralation between Block and Geo

Allowing for the 90-day total investment horizon Block is expected to generate 2.9 times less return on investment than Geo. But when comparing it to its historical volatility, Block Inc is 1.31 times less risky than Geo. It trades about 0.05 of its potential returns per unit of risk. Geo Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,056  in Geo Group on September 13, 2024 and sell it today you would earn a total of  1,724  from holding Geo Group or generate 163.26% return on investment over 90 days.

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

Block Inc  vs.  Geo Group

Block Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Block Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Block reported solid returns over the last few months and may actually be approaching a breakup point.

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 Block and Geo

The main advantage of trading using opposite Block and Geo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Block 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 Block Inc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.