Correlation Between Geo and Hashicorp
Can any of the company-specific risk be diversified away by investing in both Geo and Hashicorp 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 Geo and Hashicorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Geo Group and Hashicorp, you can compare the effects of market volatilities on Geo and Hashicorp 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 Geo with a short position of Hashicorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geo and Hashicorp.
Diversification Opportunities for Geo and Hashicorp
Very weak diversification
The 3 months correlation between Geo and Hashicorp is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Geo Group and Hashicorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hashicorp and Geo 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 Geo Group are associated (or correlated) with Hashicorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hashicorp has no effect on the direction of Geo i.e., Geo and Hashicorp go up and down completely randomly.
Pair Corralation between Geo and Hashicorp
Considering the 90-day investment horizon Geo is expected to generate 2.92 times less return on investment than Hashicorp. But when comparing it to its historical volatility, Geo Group is 1.93 times less risky than Hashicorp. It trades about 0.07 of its potential returns per unit of risk. Hashicorp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,693 in Hashicorp on January 25, 2024 and sell it today you would earn a total of 222.00 from holding Hashicorp or generate 8.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Geo Group vs. Hashicorp
Performance |
| Timeline |
| Geo Group |
| Hashicorp |
Geo and Hashicorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Geo and Hashicorp
The main advantage of trading using opposite Geo and Hashicorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Geo position performs unexpectedly, Hashicorp 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 Hashicorp will offset losses from the drop in Hashicorp's long position.The idea behind Geo Group and Hashicorp 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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