Correlation Between GM and Seaport Entertainment

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

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

Diversification Opportunities for GM and Seaport Entertainment

0.45

Correlation Coefficient

GM  Seaport Entertainment

Very weak diversification

The 3 months correlation between GM and Seaport is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Seaport Entertainment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seaport Entertainment 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 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 GM i.e., GM and Seaport Entertainment go up and down completely randomly.

Pair Corralation between GM and Seaport Entertainment

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Seaport Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.55 times less risky than Seaport Entertainment. The stock trades about -0.14 of its potential returns per unit of risk. The Seaport Entertainment Group is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  3,071  in Seaport Entertainment Group on September 12, 2024 and sell it today you would lose (192.00) from holding Seaport Entertainment Group or give up 6.25% of portfolio value over 90 days.

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

General Motors  vs.  Seaport Entertainment Group

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 unfluctuating primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Seaport Entertainment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seaport Entertainment Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Seaport Entertainment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GM and Seaport Entertainment

The main advantage of trading using opposite GM and Seaport Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.