Correlation Between National Health and GEO

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

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

Diversification Opportunities for National Health and GEO

-0.3

Correlation Coefficient

National Health  GEO

Very good diversification

The 3 months correlation between National and GEO is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and The GEO Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEO Group and National Health 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 National Health Investors 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 National Health i.e., National Health and GEO go up and down completely randomly.

Pair Corralation between National Health and GEO

Assuming the 90 days horizon National Health is expected to generate 2.02 times less return on investment than GEO. But when comparing it to its historical volatility, National Health Investors is 2.64 times less risky than GEO. It trades about 0.05 of its potential returns per unit of risk. The GEO Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,636  in The GEO Group on December 28, 2024 and sell it today you would earn a total of  113.00  from holding The GEO Group or generate 4.29% return on investment over 90 days.

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

National Health Investors  vs.  The GEO Group

National Health Investors

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Health Investors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, National Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

GEO Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The GEO Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, GEO may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with National Health and GEO

The main advantage of trading using opposite National Health and GEO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health 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 National Health Investors and The 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.