Correlation Between Bank of Georgia and Telecom Italia

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

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

Diversification Opportunities for Bank of Georgia and Telecom Italia

-0.55

Correlation Coefficient

Bank of Georgia  Telecom Italia

Excellent diversification

The 3 months correlation between Bank and Telecom is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Georgia and Telecom Italia SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Italia SpA and Bank of Georgia 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 Bank of Georgia are associated (or correlated) with Telecom Italia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecom Italia SpA has no effect on the direction of Bank of Georgia i.e., Bank of Georgia and Telecom Italia go up and down completely randomly.

Pair Corralation between Bank of Georgia and Telecom Italia

Assuming the 90 days trading horizon Bank of Georgia is expected to under-perform the Telecom Italia. But the stock apears to be less risky and, when comparing its historical volatility, Bank of Georgia is 1.62 times less risky than Telecom Italia. The stock trades about -0.11 of its potential returns per unit of risk. The Telecom Italia SpA is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  26.00  in Telecom Italia SpA on September 14, 2024 and sell it today you would earn a total of  3.00  from holding Telecom Italia SpA or generate 11.54% return on investment over 90 days.

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

Bank of Georgia  vs.  Telecom Italia SpA

Bank of Georgia

Risk-Adjusted Performance

10 of 100

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 unveiled solid returns over the last few months and may actually be approaching a breakup point.

Telecom Italia SpA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Italia SpA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Telecom Italia is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bank of Georgia and Telecom Italia

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

The idea behind Bank of Georgia and Telecom Italia SpA 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.