Correlation Between Compania Cervecerias and SEI Investments

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

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

Diversification Opportunities for Compania Cervecerias and SEI Investments

0.26

Correlation Coefficient

Compania Cervecerias  SEI Investments

Modest diversification

The 3 months correlation between Compania and SEI is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and SEI Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Investments and Compania Cervecerias 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 Compania Cervecerias Unidas 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 Compania Cervecerias i.e., Compania Cervecerias and SEI Investments go up and down completely randomly.

Pair Corralation between Compania Cervecerias and SEI Investments

Considering the 90-day investment horizon Compania Cervecerias is expected to generate 1.95 times less return on investment than SEI Investments. But when comparing it to its historical volatility, Compania Cervecerias Unidas is 1.26 times less risky than SEI Investments. It trades about 0.03 of its potential returns per unit of risk. SEI Investments is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8,262  in SEI Investments on October 22, 2024 and sell it today you would earn a total of  86.00  from holding SEI Investments or generate 1.04% return on investment over 90 days.

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

Compania Cervecerias Unidas  vs.  SEI Investments

Compania Cervecerias

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Compania Cervecerias is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

SEI Investments

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SEI Investments are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent forward indicators, SEI Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compania Cervecerias and SEI Investments

The main advantage of trading using opposite Compania Cervecerias and SEI Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania Cervecerias 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' long position.

The idea behind Compania Cervecerias Unidas 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.