Correlation Between Bank of Georgia and Unilever PLC

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

Diversification Opportunities for Bank of Georgia and Unilever PLC

-0.78

Correlation Coefficient

Bank of Georgia  Unilever PLC

Pay attention - limited upside

The 3 months correlation between Bank and Unilever is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Georgia and Unilever PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever 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 Unilever PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unilever PLC has no effect on the direction of Bank of Georgia i.e., Bank of Georgia and Unilever PLC go up and down completely randomly.

Pair Corralation between Bank of Georgia and Unilever PLC

Assuming the 90 days trading horizon Bank of Georgia is expected to generate 2.55 times more return on investment than Unilever PLC. However, Bank of Georgia is 2.55 times more volatile than Unilever PLC. It trades about 0.14 of its potential returns per unit of risk. Unilever PLC is currently generating about -0.06 per unit of risk. If you would invest  394,571  in Bank of Georgia on September 19, 2024 and sell it today you would earn a total of  80,429  from holding Bank of Georgia or generate 20.38% return on investment over 90 days.

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

Bank of Georgia  vs.  Unilever PLC

Bank of Georgia

Risk-Adjusted Performance

11 of 100

OK

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.

Unilever PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unilever PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Unilever PLC is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bank of Georgia and Unilever PLC

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

The idea behind Bank of Georgia and Unilever 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.