Correlation Between New Concept and Seaport Entertainment

Can any of the company-specific risk be diversified away by investing in both New Concept and Seaport Entertainment 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 New Concept and Seaport Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between New Concept Energy and Seaport Entertainment Group, you can compare the effects of market volatilities on New Concept and Seaport Entertainment 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 New Concept with a short position of Seaport Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Concept and Seaport Entertainment.

Diversification Opportunities for New Concept and Seaport Entertainment

-0.09

Correlation Coefficient

New Concept  Seaport Entertainment

Good diversification

The 3 months correlation between New and Seaport is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding New Concept Energy and Seaport Entertainment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seaport Entertainment and New Concept 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 New Concept Energy are associated (or correlated) with Seaport Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seaport Entertainment has no effect on the direction of New Concept i.e., New Concept and Seaport Entertainment go up and down completely randomly.

Pair Corralation between New Concept and Seaport Entertainment

Considering the 90-day investment horizon New Concept is expected to generate 3.2 times less return on investment than Seaport Entertainment. But when comparing it to its historical volatility, New Concept Energy is 1.22 times less risky than Seaport Entertainment. It trades about 0.02 of its potential returns per unit of risk. Seaport Entertainment Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,991  in Seaport Entertainment Group on September 3, 2024 and sell it today you would earn a total of  394.00  from holding Seaport Entertainment Group or generate 13.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	17.98%
Values	Daily Returns

New Concept Energy  vs.  Seaport Entertainment Group

New Concept Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Concept Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, New Concept is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Seaport Entertainment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Seaport Entertainment Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, Seaport Entertainment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Concept and Seaport Entertainment

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

The idea behind New Concept Energy and Seaport Entertainment Group 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.