Correlation Between Bank of Georgia and 3I Group

Can any of the company-specific risk be diversified away by investing in both Bank of Georgia and 3I Group 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 3I Group 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 3I Group PLC, you can compare the effects of market volatilities on Bank of Georgia and 3I Group 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 3I Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Georgia and 3I Group.

Diversification Opportunities for Bank of Georgia and 3I Group

0.72

Correlation Coefficient

Bank of Georgia  3I Group

Poor diversification

The 3 months correlation between Bank and III is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Georgia and 3I Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3I Group PLC 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 3I Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3I Group PLC has no effect on the direction of Bank of Georgia i.e., Bank of Georgia and 3I Group go up and down completely randomly.

Pair Corralation between Bank of Georgia and 3I Group

Assuming the 90 days trading horizon Bank of Georgia is expected to generate 1.49 times more return on investment than 3I Group. However, Bank of Georgia is 1.49 times more volatile than 3I Group PLC. It trades about 0.08 of its potential returns per unit of risk. 3I Group PLC is currently generating about 0.1 per unit of risk. If you would invest  376,921  in Bank of Georgia on September 25, 2024 and sell it today you would earn a total of  84,079  from holding Bank of Georgia or generate 22.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.22%
Values	Daily Returns

Bank of Georgia  vs.  3I Group PLC

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.

3I Group PLC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 3I Group PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, 3I Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bank of Georgia and 3I Group

The main advantage of trading using opposite Bank of Georgia and 3I Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Georgia position performs unexpectedly, 3I Group 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 3I Group will offset losses from the drop in 3I Group's long position.

The idea behind Bank of Georgia and 3I Group 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.