Correlation Between APA and Geo

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

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

Diversification Opportunities for APA and Geo

0.83

Correlation Coefficient

APA  Geo

Very poor diversification

The 3 months correlation between APA and Geo is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Geo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geo Group and APA 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 APA Corporation 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 APA i.e., APA and Geo go up and down completely randomly.

Pair Corralation between APA and Geo

Considering the 90-day investment horizon APA Corporation is expected to under-perform the Geo. But the stock apears to be less risky and, when comparing its historical volatility, APA Corporation is 1.37 times less risky than Geo. The stock trades about -0.17 of its potential returns per unit of risk. The Geo Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,457  in Geo Group on January 25, 2024 and sell it today you would earn a total of  42.00  from holding Geo Group or generate 2.88% return on investment over 90 days.

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

APA Corp.  vs.  Geo Group

APA Corporation

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in APA Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, APA 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

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Geo Group are ranked lower than 14 (%) 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 APA and Geo

The main advantage of trading using opposite APA and Geo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA 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 APA Corporation 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.