Correlation Between Bank of Georgia and Shell Plc

Can any of the company-specific risk be diversified away by investing in both Bank of Georgia and Shell 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 Bank of Georgia and Shell Plc 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 Shell plc, you can compare the effects of market volatilities on Bank of Georgia and Shell 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 Bank of Georgia with a short position of Shell Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Georgia and Shell Plc.

Diversification Opportunities for Bank of Georgia and Shell Plc

-0.03

Correlation Coefficient

Bank of Georgia  Shell Plc

Good diversification

The 3 months correlation between Bank and Shell is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Georgia and Shell plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell 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 Shell Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shell plc has no effect on the direction of Bank of Georgia i.e., Bank of Georgia and Shell Plc go up and down completely randomly.

Pair Corralation between Bank of Georgia and Shell Plc

Assuming the 90 days trading horizon Bank of Georgia is expected to generate 1.63 times more return on investment than Shell Plc. However, Bank of Georgia is 1.63 times more volatile than Shell plc. It trades about 0.16 of its potential returns per unit of risk. Shell plc is currently generating about -0.08 per unit of risk. If you would invest  378,964  in Bank of Georgia on September 23, 2024 and sell it today you would earn a total of  89,036  from holding Bank of Georgia or generate 23.49% return on investment over 90 days.

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

Bank of Georgia  vs.  Shell plc

Bank of Georgia

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Georgia are ranked lower than 12 (%) 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.

Shell plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shell plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Bank of Georgia and Shell Plc

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

The idea behind Bank of Georgia and Shell 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.