Correlation Between Compass Diversified and SEI Investments

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

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

Diversification Opportunities for Compass Diversified and SEI Investments

0.36

Correlation Coefficient

Compass Diversified  SEI Investments

Weak diversification

The 3 months correlation between Compass and SEI is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified Holdings and SEI Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Investments and Compass Diversified 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 Compass Diversified Holdings 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 Compass Diversified i.e., Compass Diversified and SEI Investments go up and down completely randomly.

Pair Corralation between Compass Diversified and SEI Investments

Assuming the 90 days trading horizon Compass Diversified Holdings is expected to generate 0.85 times more return on investment than SEI Investments. However, Compass Diversified Holdings is 1.17 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 -0.1 per unit of risk. If you would invest  2,272  in Compass Diversified Holdings on December 20, 2024 and sell it today you would lose (52.00) from holding Compass Diversified Holdings or give up 2.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Compass Diversified Holdings  vs.  SEI Investments

Compass Diversified

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compass Diversified Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Compass Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SEI Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days SEI Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Compass Diversified and SEI Investments

The main advantage of trading using opposite Compass Diversified and SEI Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Diversified 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 Compass Diversified Holdings 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.