Correlation Between Bank of Georgia Group PLC and Western Alliance

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

Diversification Opportunities for Bank of Georgia Group PLC and Western Alliance

-0.21

Correlation Coefficient

Bank of Georgia Group PLC  Western Alliance

Very good diversification

The 3 months correlation between Bank and Western is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Georgia and Western Alliance Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Alliance Ban and Bank of Georgia Group PLC 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 Western Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Alliance Ban has no effect on the direction of Bank of Georgia Group PLC i.e., Bank of Georgia Group PLC and Western Alliance go up and down completely randomly.

Pair Corralation between Bank of Georgia Group PLC and Western Alliance

Assuming the 90 days horizon Bank of Georgia is expected to generate 1.76 times more return on investment than Western Alliance. However, Bank of Georgia Group PLC is 1.76 times more volatile than Western Alliance Bancorporation. It trades about 0.21 of its potential returns per unit of risk. Western Alliance Bancorporation is currently generating about 0.05 per unit of risk. If you would invest  5,725  in Bank of Georgia on February 4, 2024 and sell it today you would earn a total of  1,000.00  from holding Bank of Georgia or generate 17.47% 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.  Western Alliance Bancorp.

Bank of Georgia Group PLC

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. Despite nearly weak basic indicators, Bank of Georgia Group PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Western Alliance Ban

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Alliance Bancorporation are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Western Alliance is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bank of Georgia Group PLC and Western Alliance

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

The idea behind Bank of Georgia and Western Alliance Bancorporation 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.