Correlation Between Knife River and SEI Investments

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

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

Diversification Opportunities for Knife River and SEI Investments

0.89

Correlation Coefficient

Knife River  SEI Investments

Very poor diversification

The 3 months correlation between Knife and SEI is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and SEI Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Investments and Knife River 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 Knife River 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 Knife River i.e., Knife River and SEI Investments go up and down completely randomly.

Pair Corralation between Knife River and SEI Investments

Considering the 90-day investment horizon Knife River is expected to generate 2.16 times more return on investment than SEI Investments. However, Knife River is 2.16 times more volatile than SEI Investments. It trades about -0.03 of its potential returns per unit of risk. SEI Investments is currently generating about -0.07 per unit of risk. If you would invest  10,297  in Knife River on December 27, 2024 and sell it today you would lose (702.00) from holding Knife River or give up 6.82% of portfolio value over 90 days.

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

Knife River  vs.  SEI Investments

Knife River

Risk-Adjusted Performance

Very Weak

Over the last 90 days Knife River has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Knife River is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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 rather sound forward indicators, SEI Investments is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Knife River and SEI Investments

The main advantage of trading using opposite Knife River and SEI Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knife River 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 Knife River 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 CEOs Directory module to screen CEOs from public companies around the world.