So, short and sweet , here is what I found ...
1) GEO is 14% exposed to BOP vs. CXW at 3% from a revenue standpoint (probably biggest factor here)
2) CXW's Managed Only Beds account for 12% of its total bed capacity while this number is 30% for GEO .
( managed only meaning they do not own the real estate on these ones )
3) GEO is approximately twice as leveraged as CXW and CXW has already eliminated its dividend with plans to further de-leverage .
GEO will be hurt more than CXW by loss of federal contracts. CXW is nicer situated to outperform GEO going forward ...
How I plan to trade this :
I will take a long on CXW first as the technicals look nicer for long entry at this time. For the short on GEO , I plan to wait for a little more upside before shorting, I will wait for the next cycle up to short GEO . Equal position sizing in each.
I still have lots to learn with ratio trades, this is my first one I have decided to publish and it's only my point of view. So, please do additional research if you decide to enter yourself, just sharing a perspective here. :)
Constructive input is always appreciated and welcome too.
Good luck ~
Generally speaking, my long positions are typically only 2.5% of account and my shorts are typically only 0.5% of account (to help limit the risk as shorting is certainly more risky). I am pretty much always typically net long, but depending on market cycles , and especially around this recent two week period, I try to build on my short positions to help hedge . Rather than beta hedging I am going to try doing these trades exactly the same as I normally would.
I will swing the long side if there is a good solid entry and use a comfortable technical resistance/support range to determine an exit and stop . I will do this for both long and short side of pair but likely will have to enter one at a time and place one on a watch list . Using this method would allow me to be around 20% short, which I am happy with.
I wouldn't be beta hedged but since I am taking advantage the the swing trading method and entering/exiting on a detailed plan, I think this would work quite well and not to mention there would be physical stops on everything too, for risk management.
I already trade effectively with a similar concept but I think I/we can add to the effectiveness of my current strategy by developing a list of pair trades to work off and keep on watch for extra opportunities, basically a watch list with long and short trades . I find its easy to get carried away and take too many longs without protection so a long list of good pairs would be an asset .
Also, on my shorts, if the short float is excessive and especially if the short ratio is high I won't enter unless its popped and I feel like shorting it as a day trade it on heavy selling. Personally, I prefer swings and have been much more successful swing trading compared to day trading .
Obviously no one does things the same , we all find our own way don't we :)
Thanks for the comment.