Correlation Between Bank of Georgia and Solid State

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

Diversification Opportunities for Bank of Georgia and Solid State

-0.81

Correlation Coefficient

Bank of Georgia  Solid State

Pay attention - limited upside

The 3 months correlation between Bank and Solid is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Georgia and Solid State Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solid State 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 Solid State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solid State Plc has no effect on the direction of Bank of Georgia i.e., Bank of Georgia and Solid State go up and down completely randomly.

Pair Corralation between Bank of Georgia and Solid State

Assuming the 90 days trading horizon Bank of Georgia is expected to under-perform the Solid State. But the stock apears to be less risky and, when comparing its historical volatility, Bank of Georgia is 2.56 times less risky than Solid State. The stock trades about -0.16 of its potential returns per unit of risk. The Solid State Plc is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  13,500  in Solid State Plc on September 18, 2024 and sell it today you would lose (500.00) from holding Solid State Plc or give up 3.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Bank of Georgia  vs.  Solid State Plc

Bank of Georgia

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Georgia are ranked lower than 11 (%) 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.

Solid State Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solid State Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Bank of Georgia and Solid State

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

The idea behind Bank of Georgia and Solid State 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.