Correlation Between SEI Investments and Exchange Bankshares

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

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

Diversification Opportunities for SEI Investments and Exchange Bankshares

-0.65

Correlation Coefficient

SEI Investments  Exchange Bankshares

Excellent diversification

The 3 months correlation between SEI and Exchange is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding SEI Investments and Exchange Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Bankshares 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 Exchange Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Bankshares has no effect on the direction of SEI Investments i.e., SEI Investments and Exchange Bankshares go up and down completely randomly.

Pair Corralation between SEI Investments and Exchange Bankshares

Given the investment horizon of 90 days SEI Investments is expected to under-perform the Exchange Bankshares. But the stock apears to be less risky and, when comparing its historical volatility, SEI Investments is 1.69 times less risky than Exchange Bankshares. The stock trades about -0.09 of its potential returns per unit of risk. The Exchange Bankshares is currently generating about 0.55 of returns per unit of risk over similar time horizon. If you would invest  4,570  in Exchange Bankshares on December 19, 2024 and sell it today you would earn a total of  220.00  from holding Exchange Bankshares or generate 4.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	6.78%
Values	Daily Returns

SEI Investments  vs.  Exchange Bankshares

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.

Exchange Bankshares

Risk-Adjusted Performance

Excellent

Over the last 90 days Exchange Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly weak fundamental indicators, Exchange Bankshares demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SEI Investments and Exchange Bankshares

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

The idea behind SEI Investments and Exchange Bankshares 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.