Correlation Between Saratoga Investment and SEI Investments

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

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

Diversification Opportunities for Saratoga Investment and SEI Investments

0.57

Correlation Coefficient

Saratoga Investment  SEI Investments

Very weak diversification

The 3 months correlation between Saratoga and SEI is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Saratoga Investment Corp and SEI Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Investments and Saratoga Investment 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 Saratoga Investment Corp 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 Saratoga Investment i.e., Saratoga Investment and SEI Investments go up and down completely randomly.

Pair Corralation between Saratoga Investment and SEI Investments

Considering the 90-day investment horizon Saratoga Investment Corp is expected to generate 0.61 times more return on investment than SEI Investments. However, Saratoga Investment Corp is 1.63 times less risky than SEI Investments. It trades about 0.36 of its potential returns per unit of risk. SEI Investments is currently generating about 0.07 per unit of risk. If you would invest  2,374  in Saratoga Investment Corp on October 21, 2024 and sell it today you would earn a total of  116.00  from holding Saratoga Investment Corp or generate 4.89% return on investment over 90 days.

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

Saratoga Investment Corp  vs.  SEI Investments

Saratoga Investment Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Saratoga Investment Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Saratoga Investment is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

SEI Investments

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SEI Investments are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent forward indicators, SEI Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Saratoga Investment and SEI Investments

The main advantage of trading using opposite Saratoga Investment and SEI Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Saratoga Investment 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 Saratoga Investment Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.