Correlation Between Bank of Georgia and JSC National

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

Diversification Opportunities for Bank of Georgia and JSC National

0.7

Correlation Coefficient

Bank of Georgia  JSC National

Poor diversification

The 3 months correlation between Bank and JSC is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Georgia and JSC National Atomic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSC National Atomic 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 JSC National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSC National Atomic has no effect on the direction of Bank of Georgia i.e., Bank of Georgia and JSC National go up and down completely randomly.

Pair Corralation between Bank of Georgia and JSC National

Assuming the 90 days trading horizon Bank of Georgia is expected to generate 1.29 times more return on investment than JSC National. However, Bank of Georgia is 1.29 times more volatile than JSC National Atomic. It trades about -0.06 of its potential returns per unit of risk. JSC National Atomic is currently generating about -0.23 per unit of risk. If you would invest  488,000  in Bank of Georgia on September 20, 2024 and sell it today you would lose (13,000) from holding Bank of Georgia or give up 2.66% of portfolio value over 90 days.

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

Bank of Georgia  vs.  JSC National Atomic

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.

JSC National Atomic

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JSC National Atomic are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, JSC National is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bank of Georgia and JSC National

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

The idea behind Bank of Georgia and JSC National Atomic 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.