Correlation Between Freedom Day and SEI Select

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

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

Diversification Opportunities for Freedom Day and SEI Select

0.18

Correlation Coefficient

Freedom Day  SEI Select

Average diversification

The 3 months correlation between Freedom and SEI is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Day Dividend and SEI Select Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Select Emerging and Freedom Day 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 Freedom Day Dividend are associated (or correlated) with SEI Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEI Select Emerging has no effect on the direction of Freedom Day i.e., Freedom Day and SEI Select go up and down completely randomly.

Pair Corralation between Freedom Day and SEI Select

Given the investment horizon of 90 days Freedom Day Dividend is expected to generate 1.02 times more return on investment than SEI Select. However, Freedom Day is 1.02 times more volatile than SEI Select Emerging. It trades about 0.05 of its potential returns per unit of risk. SEI Select Emerging is currently generating about -0.08 per unit of risk. If you would invest  3,286  in Freedom Day Dividend on October 26, 2024 and sell it today you would earn a total of  157.50  from holding Freedom Day Dividend or generate 4.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	57.26%
Values	Daily Returns

Freedom Day Dividend  vs.  SEI Select Emerging

Freedom Day Dividend

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Day Dividend are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Freedom Day is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

SEI Select Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SEI Select Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, SEI Select is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Freedom Day and SEI Select

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

The idea behind Freedom Day Dividend and SEI Select Emerging 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.