Correlation Between Fortune Brands and Bank of Georgia Group PLC

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

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

Diversification Opportunities for Fortune Brands and Bank of Georgia Group PLC

-0.78

Correlation Coefficient

Fortune Brands  Bank of Georgia Group PLC

Pay attention - limited upside

The 3 months correlation between Fortune and Bank is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home and Bank of Georgia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Georgia Group PLC and Fortune Brands 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 Fortune Brands Home are associated (or correlated) with Bank of Georgia Group PLC. 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 Group PLC has no effect on the direction of Fortune Brands i.e., Fortune Brands and Bank of Georgia Group PLC go up and down completely randomly.

Pair Corralation between Fortune Brands and Bank of Georgia Group PLC

Assuming the 90 days trading horizon Fortune Brands Home is expected to under-perform the Bank of Georgia Group PLC. In addition to that, Fortune Brands is 1.02 times more volatile than Bank of Georgia. It trades about -0.09 of its total potential returns per unit of risk. Bank of Georgia is currently generating about 0.13 per unit of volatility. If you would invest  469,500  in Bank of Georgia on December 30, 2024 and sell it today you would earn a total of  86,500  from holding Bank of Georgia or generate 18.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	69.23%
Values	Daily Returns

Fortune Brands Home  vs.  Bank of Georgia

Fortune Brands Home

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fortune Brands Home has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Bank of Georgia Group PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Georgia are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bank of Georgia Group PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortune Brands and Bank of Georgia Group PLC

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

The idea behind Fortune Brands Home 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.