Correlation Between SEI Investments and First American

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

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

Diversification Opportunities for SEI Investments and First American

0.2

Correlation Coefficient

SEI Investments  First American

Modest diversification

The 3 months correlation between SEI and First is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding SEI Investments and First American Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Funds 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 First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Funds has no effect on the direction of SEI Investments i.e., SEI Investments and First American go up and down completely randomly.

Pair Corralation between SEI Investments and First American

Given the investment horizon of 90 days SEI Investments is expected to generate 6.34 times less return on investment than First American. But when comparing it to its historical volatility, SEI Investments is 18.88 times less risky than First American. It trades about 0.09 of its potential returns per unit of risk. First American Funds is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  403.00  in First American Funds on October 5, 2024 and sell it today you would lose (303.00) from holding First American Funds or give up 75.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.78%
Values	Daily Returns

SEI Investments  vs.  First American Funds

SEI Investments

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SEI Investments are ranked lower than 15 (%) 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.

First American Funds

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First American Funds has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, First American 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 First American

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

The idea behind SEI Investments and First American Funds 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.