Correlation Between GM and Seacoast Banking
Can any of the company-specific risk be diversified away by investing in both GM and Seacoast Banking 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 Seacoast Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Seacoast Banking, you can compare the effects of market volatilities on GM and Seacoast Banking 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 Seacoast Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Seacoast Banking.
Diversification Opportunities for GM and Seacoast Banking
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Seacoast is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Seacoast Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seacoast Banking 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 Seacoast Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seacoast Banking has no effect on the direction of GM i.e., GM and Seacoast Banking go up and down completely randomly.
Pair Corralation between GM and Seacoast Banking
Allowing for the 90-day total investment horizon GM is expected to generate 1.2 times less return on investment than Seacoast Banking. But when comparing it to its historical volatility, General Motors is 1.08 times less risky than Seacoast Banking. It trades about 0.17 of its potential returns per unit of risk. Seacoast Banking is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,670 in Seacoast Banking on September 1, 2024 and sell it today you would earn a total of 326.00 from holding Seacoast Banking or generate 12.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Seacoast Banking
Performance |
| Timeline |
| General Motors |
| Seacoast Banking |
GM and Seacoast Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Seacoast Banking
The main advantage of trading using opposite GM and Seacoast Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Seacoast Banking 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 Seacoast Banking will offset losses from the drop in Seacoast Banking's long position.The idea behind General Motors and Seacoast Banking 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.| Seacoast Banking vs. Home Federal Bancorp | Seacoast Banking vs. First Financial Northwest | Seacoast Banking vs. First Northwest Bancorp | Seacoast Banking vs. First Capital |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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