Correlation Between GM and SeAH Bestee

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

By analyzing existing cross correlation between General Motors and SeAH Bestee, you can compare the effects of market volatilities on GM and SeAH Bestee 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 GM with a short position of SeAH Bestee. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and SeAH Bestee.

Diversification Opportunities for GM and SeAH Bestee

0.67

Correlation Coefficient

GM  SeAH Bestee

Poor diversification

The 3 months correlation between GM and SeAH is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and SeAH Bestee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SeAH Bestee and GM 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 General Motors are associated (or correlated) with SeAH Bestee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SeAH Bestee has no effect on the direction of GM i.e., GM and SeAH Bestee go up and down completely randomly.

Pair Corralation between GM and SeAH Bestee

Allowing for the 90-day total investment horizon GM is expected to generate 1.24 times less return on investment than SeAH Bestee. But when comparing it to its historical volatility, General Motors is 1.46 times less risky than SeAH Bestee. It trades about 0.1 of its potential returns per unit of risk. SeAH Bestee is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,979,000  in SeAH Bestee on September 2, 2024 and sell it today you would earn a total of  321,000  from holding SeAH Bestee or generate 16.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.75%
Values	Daily Returns

General Motors  vs.  SeAH Bestee

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

SeAH Bestee

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SeAH Bestee are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SeAH Bestee sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and SeAH Bestee

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

The idea behind General Motors and SeAH Bestee 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.