Correlation Between Empire Metals and Bank of Georgia

Can any of the company-specific risk be diversified away by investing in both Empire Metals and Bank of Georgia 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 Empire Metals and Bank of Georgia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Empire Metals Limited and Bank of Georgia, you can compare the effects of market volatilities on Empire Metals and Bank of Georgia 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 Empire Metals with a short position of Bank of Georgia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire Metals and Bank of Georgia.

Diversification Opportunities for Empire Metals and Bank of Georgia

-0.79

Correlation Coefficient

Empire Metals  Bank of Georgia

Pay attention - limited upside

The 3 months correlation between Empire and Bank is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Empire Metals Limited and Bank of Georgia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Georgia and Empire Metals 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 Empire Metals Limited are associated (or correlated) with Bank of Georgia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Georgia has no effect on the direction of Empire Metals i.e., Empire Metals and Bank of Georgia go up and down completely randomly.

Pair Corralation between Empire Metals and Bank of Georgia

Assuming the 90 days trading horizon Empire Metals Limited is expected to under-perform the Bank of Georgia. In addition to that, Empire Metals is 1.32 times more volatile than Bank of Georgia. It trades about -0.14 of its total potential returns per unit of risk. Bank of Georgia is currently generating about 0.17 per unit of volatility. If you would invest  380,915  in Bank of Georgia on September 20, 2024 and sell it today you would earn a total of  94,085  from holding Bank of Georgia or generate 24.7% return on investment over 90 days.

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

Empire Metals Limited  vs.  Bank of Georgia

Empire Metals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Empire Metals Limited 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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.

Pair Trading with Empire Metals and Bank of Georgia

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

The idea behind Empire Metals Limited and Bank of Georgia 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.