Correlation Between DFS Furniture and SEI INVESTMENTS

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

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

Diversification Opportunities for DFS Furniture and SEI INVESTMENTS

0.72

Correlation Coefficient

DFS Furniture  SEI INVESTMENTS

Poor diversification

The 3 months correlation between DFS and SEI is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and SEI INVESTMENTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI INVESTMENTS and DFS Furniture 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 DFS Furniture PLC 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 DFS Furniture i.e., DFS Furniture and SEI INVESTMENTS go up and down completely randomly.

Pair Corralation between DFS Furniture and SEI INVESTMENTS

Assuming the 90 days trading horizon DFS Furniture is expected to generate 4.04 times less return on investment than SEI INVESTMENTS. But when comparing it to its historical volatility, DFS Furniture PLC is 1.05 times less risky than SEI INVESTMENTS. It trades about 0.06 of its potential returns per unit of risk. SEI INVESTMENTS is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  6,600  in SEI INVESTMENTS on September 23, 2024 and sell it today you would earn a total of  1,200  from holding SEI INVESTMENTS or generate 18.18% return on investment over 90 days.

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

DFS Furniture PLC  vs.  SEI INVESTMENTS

DFS Furniture PLC

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DFS Furniture PLC are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DFS Furniture unveiled solid returns over the last few months and may actually be approaching a breakup point.

SEI INVESTMENTS

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SEI INVESTMENTS are ranked lower than 20 (%) 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 DFS Furniture and SEI INVESTMENTS

The main advantage of trading using opposite DFS Furniture and SEI INVESTMENTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture 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 DFS Furniture PLC 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.