Correlation Between Renren and Geo

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

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

Diversification Opportunities for Renren and Geo

-0.07

Correlation Coefficient

Renren  Geo

Good diversification

The 3 months correlation between Renren and Geo is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Renren Inc and Geo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geo Group and Renren 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 Renren Inc 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 Renren i.e., Renren and Geo go up and down completely randomly.

Pair Corralation between Renren and Geo

If you would invest  1,287  in Geo Group on January 17, 2024 and sell it today you would earn a total of  233.00  from holding Geo Group or generate 18.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Renren Inc  vs.  Geo Group

Renren Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renren Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Renren is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Geo Group

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Geo Group are ranked lower than 18 (%) 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 Renren and Geo

The main advantage of trading using opposite Renren and Geo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Renren 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 Renren Inc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.