Correlation Between Bank of Georgia and Diversified Energy
Can any of the company-specific risk be diversified away by investing in both Bank of Georgia and Diversified Energy 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 Diversified Energy 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 Diversified Energy, you can compare the effects of market volatilities on Bank of Georgia and Diversified Energy 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 Diversified Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Georgia and Diversified Energy.
Diversification Opportunities for Bank of Georgia and Diversified Energy
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Diversified is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Georgia and Diversified Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Energy 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 Diversified Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Energy has no effect on the direction of Bank of Georgia i.e., Bank of Georgia and Diversified Energy go up and down completely randomly.
Pair Corralation between Bank of Georgia and Diversified Energy
Assuming the 90 days trading horizon Bank of Georgia is expected to generate 20.29 times less return on investment than Diversified Energy. But when comparing it to its historical volatility, Bank of Georgia is 27.94 times less risky than Diversified Energy. It trades about 0.08 of its potential returns per unit of risk. Diversified Energy is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 232,264 in Diversified Energy on September 19, 2024 and sell it today you would lose (107,464) from holding Diversified Energy or give up 46.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
Bank of Georgia vs. Diversified Energy
Performance |
| Timeline |
| Bank of Georgia |
| Diversified Energy |
Bank of Georgia and Diversified Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Georgia and Diversified Energy
The main advantage of trading using opposite Bank of Georgia and Diversified Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Georgia position performs unexpectedly, Diversified Energy 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 Diversified Energy will offset losses from the drop in Diversified Energy's long position.| Bank of Georgia vs. Samsung Electronics Co | Bank of Georgia vs. Samsung Electronics Co | Bank of Georgia vs. Hyundai Motor | Bank of Georgia vs. Toyota Motor Corp |
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Check out your portfolio center.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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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