Correlation Between Bank of Georgia and Spotify Technology

Can any of the company-specific risk be diversified away by investing in both Bank of Georgia and Spotify Technology 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 Spotify Technology 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 Spotify Technology SA, you can compare the effects of market volatilities on Bank of Georgia and Spotify Technology 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 Spotify Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Georgia and Spotify Technology.

Diversification Opportunities for Bank of Georgia and Spotify Technology

0.84

Correlation Coefficient

Bank of Georgia  Spotify Technology

Very poor diversification

The 3 months correlation between Bank and Spotify is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Georgia and Spotify Technology SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spotify Technology 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 Spotify Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spotify Technology has no effect on the direction of Bank of Georgia i.e., Bank of Georgia and Spotify Technology go up and down completely randomly.

Pair Corralation between Bank of Georgia and Spotify Technology

Assuming the 90 days trading horizon Bank of Georgia is expected to generate 0.78 times more return on investment than Spotify Technology. However, Bank of Georgia is 1.29 times less risky than Spotify Technology. It trades about 0.14 of its potential returns per unit of risk. Spotify Technology SA is currently generating about -0.1 per unit of risk. If you would invest  457,500  in Bank of Georgia on October 9, 2024 and sell it today you would earn a total of  15,500  from holding Bank of Georgia or generate 3.39% return on investment over 90 days.

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

Bank of Georgia  vs.  Spotify Technology SA

Bank of Georgia

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Georgia are ranked lower than 14 (%) 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.

Spotify Technology

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Spotify Technology SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Spotify Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of Georgia and Spotify Technology

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

The idea behind Bank of Georgia and Spotify Technology SA 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.