Correlation Between SEI Investments and Kodiak Sciences

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

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

Diversification Opportunities for SEI Investments and Kodiak Sciences

0.6

Correlation Coefficient

SEI Investments  Kodiak Sciences

Poor diversification

The 3 months correlation between SEI and Kodiak is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding SEI Investments and Kodiak Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kodiak Sciences 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 Kodiak Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kodiak Sciences has no effect on the direction of SEI Investments i.e., SEI Investments and Kodiak Sciences go up and down completely randomly.

Pair Corralation between SEI Investments and Kodiak Sciences

Given the investment horizon of 90 days SEI Investments is expected to generate 0.23 times more return on investment than Kodiak Sciences. However, SEI Investments is 4.42 times less risky than Kodiak Sciences. It trades about -0.07 of its potential returns per unit of risk. Kodiak Sciences is currently generating about -0.31 per unit of risk. If you would invest  8,336  in SEI Investments on December 27, 2024 and sell it today you would lose (504.00) from holding SEI Investments or give up 6.05% 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.  Kodiak Sciences

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 rather sound forward indicators, SEI Investments is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Kodiak Sciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kodiak Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with SEI Investments and Kodiak Sciences

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

The idea behind SEI Investments and Kodiak Sciences 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.