Correlation Between SEI Investments and Commonwealth Bank

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

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

Diversification Opportunities for SEI Investments and Commonwealth Bank

0.62

Correlation Coefficient

SEI Investments  Commonwealth Bank

Poor diversification

The 3 months correlation between SEI and Commonwealth is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding SEI Investments and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and SEI Investments 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 SEI Investments are associated (or correlated) with Commonwealth Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Bank has no effect on the direction of SEI Investments i.e., SEI Investments and Commonwealth Bank go up and down completely randomly.

Pair Corralation between SEI Investments and Commonwealth Bank

Given the investment horizon of 90 days SEI Investments is expected to under-perform the Commonwealth Bank. But the stock apears to be less risky and, when comparing its historical volatility, SEI Investments is 1.11 times less risky than Commonwealth Bank. The stock trades about -0.1 of its potential returns per unit of risk. The Commonwealth Bank of is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  9,530  in Commonwealth Bank of on December 21, 2024 and sell it today you would lose (357.00) from holding Commonwealth Bank of or give up 3.75% of portfolio value over 90 days.

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

SEI Investments  vs.  Commonwealth Bank of

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 latest inconsistent performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Commonwealth Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Commonwealth Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Commonwealth Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SEI Investments and Commonwealth Bank

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

The idea behind SEI Investments and Commonwealth Bank of 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.