Correlation Between STMicroelectronics and Bank of Georgia

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

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

Diversification Opportunities for STMicroelectronics and Bank of Georgia

-0.71

Correlation Coefficient

STMicroelectronics  Bank of Georgia

Pay attention - limited upside

The 3 months correlation between STMicroelectronics and Bank is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Bank of Georgia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Georgia and STMicroelectronics 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 STMicroelectronics NV are associated (or correlated) with Bank of Georgia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Georgia has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Bank of Georgia go up and down completely randomly.

Pair Corralation between STMicroelectronics and Bank of Georgia

Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Bank of Georgia. In addition to that, STMicroelectronics is 1.01 times more volatile than Bank of Georgia. It trades about -0.01 of its total potential returns per unit of risk. Bank of Georgia is currently generating about 0.11 per unit of volatility. If you would invest  398,473  in Bank of Georgia on September 13, 2024 and sell it today you would earn a total of  57,527  from holding Bank of Georgia or generate 14.44% return on investment over 90 days.

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

STMicroelectronics NV  vs.  Bank of Georgia

STMicroelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMicroelectronics NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, STMicroelectronics is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Bank of Georgia

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Georgia are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bank of Georgia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMicroelectronics and Bank of Georgia

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

The idea behind STMicroelectronics NV and Bank of Georgia 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.