Correlation Between Diversified Energy and Bank of Georgia Group PLC

Can any of the company-specific risk be diversified away by investing in both Diversified Energy and Bank of Georgia Group 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 Diversified Energy and Bank of Georgia Group PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Diversified Energy and Bank of Georgia, you can compare the effects of market volatilities on Diversified Energy and Bank of Georgia Group 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 Diversified Energy with a short position of Bank of Georgia Group PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diversified Energy and Bank of Georgia Group PLC.

Diversification Opportunities for Diversified Energy and Bank of Georgia Group PLC

-0.59

Correlation Coefficient

Diversified Energy  Bank of Georgia Group PLC

Excellent diversification

The 3 months correlation between Diversified and Bank is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Diversified Energy and Bank of Georgia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Georgia Group PLC and Diversified Energy 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 Diversified Energy are associated (or correlated) with Bank of Georgia Group PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Georgia Group PLC has no effect on the direction of Diversified Energy i.e., Diversified Energy and Bank of Georgia Group PLC go up and down completely randomly.

Pair Corralation between Diversified Energy and Bank of Georgia Group PLC

Assuming the 90 days trading horizon Diversified Energy is expected to generate 1.09 times less return on investment than Bank of Georgia Group PLC. In addition to that, Diversified Energy is 1.19 times more volatile than Bank of Georgia. It trades about 0.08 of its total potential returns per unit of risk. Bank of Georgia is currently generating about 0.1 per unit of volatility. If you would invest  421,884  in Bank of Georgia on December 4, 2024 and sell it today you would earn a total of  111,116  from holding Bank of Georgia or generate 26.34% return on investment over 90 days.

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

Diversified Energy  vs.  Bank of Georgia

Diversified Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diversified Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady 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.

Bank of Georgia Group PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Georgia are ranked lower than 10 (%) 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.

Pair Trading with Diversified Energy and Bank of Georgia Group PLC

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

The idea behind Diversified Energy and Bank of Georgia 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.