Correlation Between CoreCivic and Gaming Leisure

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

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

Diversification Opportunities for CoreCivic and Gaming Leisure

0.09

Correlation Coefficient

CoreCivic  Gaming Leisure

Significant diversification

The 3 months correlation between CoreCivic and Gaming is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding CoreCivic and Gaming Leisure Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaming Leisure Properties and CoreCivic 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 CoreCivic are associated (or correlated) with Gaming Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaming Leisure Properties has no effect on the direction of CoreCivic i.e., CoreCivic and Gaming Leisure go up and down completely randomly.

Pair Corralation between CoreCivic and Gaming Leisure

Considering the 90-day investment horizon CoreCivic is expected to generate 0.82 times more return on investment than Gaming Leisure. However, CoreCivic is 1.22 times less risky than Gaming Leisure. It trades about -0.12 of its potential returns per unit of risk. Gaming Leisure Properties is currently generating about -0.12 per unit of risk. If you would invest  1,565  in CoreCivic on January 26, 2024 and sell it today you would lose (53.00) from holding CoreCivic or give up 3.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

CoreCivic  vs.  Gaming Leisure Properties

CoreCivic

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CoreCivic are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, CoreCivic is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Gaming Leisure Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gaming Leisure Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Gaming Leisure is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with CoreCivic and Gaming Leisure

The main advantage of trading using opposite CoreCivic and Gaming Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CoreCivic position performs unexpectedly, Gaming Leisure 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 Gaming Leisure will offset losses from the drop in Gaming Leisure's long position.

The idea behind CoreCivic and Gaming Leisure Properties 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.