Correlation Between Geo and EchoStar

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

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

Diversification Opportunities for Geo and EchoStar

0.06

Correlation Coefficient

Geo  EchoStar

Significant diversification

The 3 months correlation between Geo and EchoStar is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Geo Group and EchoStar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EchoStar 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 EchoStar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EchoStar has no effect on the direction of Geo i.e., Geo and EchoStar go up and down completely randomly.

Pair Corralation between Geo and EchoStar

Considering the 90-day investment horizon Geo Group is expected to generate 0.81 times more return on investment than EchoStar. However, Geo Group is 1.24 times less risky than EchoStar. It trades about 0.06 of its potential returns per unit of risk. EchoStar is currently generating about -0.01 per unit of risk. If you would invest  741.00  in Geo Group on January 24, 2024 and sell it today you would earn a total of  745.00  from holding Geo Group or generate 100.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Geo Group  vs.  EchoStar

Geo Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Geo Group are ranked lower than 11 (%) 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.

EchoStar

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EchoStar are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, EchoStar may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Geo and EchoStar

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

The idea behind Geo Group and EchoStar 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.