Correlation Between Microsoft and SEI Exchange

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

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

Diversification Opportunities for Microsoft and SEI Exchange

-0.01

Correlation Coefficient

Microsoft  SEI Exchange

Good diversification

The 3 months correlation between Microsoft and SEI is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SEI Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Exchange Traded and Microsoft 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 Microsoft are associated (or correlated) with SEI Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEI Exchange Traded has no effect on the direction of Microsoft i.e., Microsoft and SEI Exchange go up and down completely randomly.

Pair Corralation between Microsoft and SEI Exchange

Given the investment horizon of 90 days Microsoft is expected to under-perform the SEI Exchange. In addition to that, Microsoft is 2.01 times more volatile than SEI Exchange Traded. It trades about -0.1 of its total potential returns per unit of risk. SEI Exchange Traded is currently generating about -0.05 per unit of volatility. If you would invest  3,553  in SEI Exchange Traded on December 22, 2024 and sell it today you would lose (87.00) from holding SEI Exchange Traded or give up 2.45% of portfolio value over 90 days.

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

Microsoft  vs.  SEI Exchange Traded

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

SEI Exchange Traded

Risk-Adjusted Performance

Very Weak

Over the last 90 days SEI Exchange Traded has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, SEI Exchange is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Microsoft and SEI Exchange

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

The idea behind Microsoft and SEI Exchange Traded 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.