Correlation Between FTC SOLAR and SEI INVESTMENTS

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

By analyzing existing cross correlation between FTC SOLAR INC and SEI INVESTMENTS, you can compare the effects of market volatilities on FTC SOLAR and SEI INVESTMENTS 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 FTC SOLAR with a short position of SEI INVESTMENTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of FTC SOLAR and SEI INVESTMENTS.

Diversification Opportunities for FTC SOLAR and SEI INVESTMENTS

-0.74

Correlation Coefficient

FTC SOLAR  SEI INVESTMENTS

Pay attention - limited upside

The 3 months correlation between FTC and SEI is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding FTC SOLAR INC and SEI INVESTMENTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI INVESTMENTS and FTC SOLAR 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 FTC SOLAR INC are associated (or correlated) with SEI INVESTMENTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEI INVESTMENTS has no effect on the direction of FTC SOLAR i.e., FTC SOLAR and SEI INVESTMENTS go up and down completely randomly.

Pair Corralation between FTC SOLAR and SEI INVESTMENTS

Assuming the 90 days horizon FTC SOLAR INC is expected to generate 13.26 times more return on investment than SEI INVESTMENTS. However, FTC SOLAR is 13.26 times more volatile than SEI INVESTMENTS. It trades about 0.01 of its potential returns per unit of risk. SEI INVESTMENTS is currently generating about 0.08 per unit of risk. If you would invest  2,800  in FTC SOLAR INC on September 27, 2024 and sell it today you would lose (2,530) from holding FTC SOLAR INC or give up 90.36% of portfolio value over 90 days.

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

FTC SOLAR INC  vs.  SEI INVESTMENTS

FTC SOLAR INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FTC SOLAR INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SEI INVESTMENTS

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SEI INVESTMENTS are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, SEI INVESTMENTS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FTC SOLAR and SEI INVESTMENTS

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

The idea behind FTC SOLAR INC and SEI INVESTMENTS 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.