Correlation Between Bank of Georgia Group PLC and Diageo PLC

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

Diversification Opportunities for Bank of Georgia Group PLC and Diageo PLC

-0.85

Correlation Coefficient

Bank of Georgia Group PLC  Diageo PLC

Pay attention - limited upside

The 3 months correlation between Bank and Diageo is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Georgia and Diageo PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo PLC and Bank of Georgia Group PLC 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 Diageo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo PLC has no effect on the direction of Bank of Georgia Group PLC i.e., Bank of Georgia Group PLC and Diageo PLC go up and down completely randomly.

Pair Corralation between Bank of Georgia Group PLC and Diageo PLC

Assuming the 90 days trading horizon Bank of Georgia is expected to generate 1.29 times more return on investment than Diageo PLC. However, Bank of Georgia Group PLC is 1.29 times more volatile than Diageo PLC. It trades about 0.15 of its potential returns per unit of risk. Diageo PLC is currently generating about -0.16 per unit of risk. If you would invest  470,000  in Bank of Georgia on December 24, 2024 and sell it today you would earn a total of  99,000  from holding Bank of Georgia or generate 21.06% return on investment over 90 days.

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

Bank of Georgia  vs.  Diageo PLC

Bank of Georgia Group PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Georgia are ranked lower than 12 (%) 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.

Diageo PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diageo PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Bank of Georgia Group PLC and Diageo PLC

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

The idea behind Bank of Georgia and Diageo PLC 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.