Correlation Between Bank of Georgia and Capital Drilling

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

Diversification Opportunities for Bank of Georgia and Capital Drilling

-0.1

Correlation Coefficient

Bank of Georgia  Capital Drilling

Good diversification

The 3 months correlation between Bank and Capital is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Georgia and Capital Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Drilling 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 Capital Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Drilling has no effect on the direction of Bank of Georgia i.e., Bank of Georgia and Capital Drilling go up and down completely randomly.

Pair Corralation between Bank of Georgia and Capital Drilling

Assuming the 90 days trading horizon Bank of Georgia is expected to generate 1.09 times more return on investment than Capital Drilling. However, Bank of Georgia is 1.09 times more volatile than Capital Drilling. It trades about 0.01 of its potential returns per unit of risk. Capital Drilling is currently generating about -0.02 per unit of risk. If you would invest  471,151  in Bank of Georgia on October 25, 2024 and sell it today you would lose (8,151) from holding Bank of Georgia or give up 1.73% of portfolio value over 90 days.

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

Bank of Georgia  vs.  Capital Drilling

Bank of Georgia

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Georgia are ranked lower than 9 (%) 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.

Capital Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Drilling 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.

Pair Trading with Bank of Georgia and Capital Drilling

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

The idea behind Bank of Georgia and Capital Drilling 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .