Correlation Between Bank of Georgia and Guaranty Trust

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

Diversification Opportunities for Bank of Georgia and Guaranty Trust

0.69

Correlation Coefficient

Bank of Georgia  Guaranty Trust

Poor diversification

The 3 months correlation between Bank and Guaranty is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Georgia and Guaranty Trust Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guaranty Trust Holding 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 Guaranty Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guaranty Trust Holding has no effect on the direction of Bank of Georgia i.e., Bank of Georgia and Guaranty Trust go up and down completely randomly.

Pair Corralation between Bank of Georgia and Guaranty Trust

Assuming the 90 days trading horizon Bank of Georgia is expected to under-perform the Guaranty Trust. In addition to that, Bank of Georgia is 1.55 times more volatile than Guaranty Trust Holding. It trades about -0.15 of its total potential returns per unit of risk. Guaranty Trust Holding is currently generating about 0.01 per unit of volatility. If you would invest  185.00  in Guaranty Trust Holding on September 27, 2024 and sell it today you would earn a total of  0.00  from holding Guaranty Trust Holding or generate 0.0% return on investment over 90 days.

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

Bank of Georgia  vs.  Guaranty Trust Holding

Bank of Georgia

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Georgia are ranked lower than 13 (%) 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.

Guaranty Trust Holding

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guaranty Trust Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Guaranty Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bank of Georgia and Guaranty Trust

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

The idea behind Bank of Georgia and Guaranty Trust Holding 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.