Correlation Between SEI Investments and NETGEAR

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

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

Diversification Opportunities for SEI Investments and NETGEAR

0.94

Correlation Coefficient

SEI Investments  NETGEAR

Almost no diversification

The 3 months correlation between SEI and NETGEAR is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding SEI Investments and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of SEI Investments i.e., SEI Investments and NETGEAR go up and down completely randomly.

Pair Corralation between SEI Investments and NETGEAR

Given the investment horizon of 90 days SEI Investments is expected to generate 0.39 times more return on investment than NETGEAR. However, SEI Investments is 2.58 times less risky than NETGEAR. It trades about 0.34 of its potential returns per unit of risk. NETGEAR is currently generating about 0.13 per unit of risk. If you would invest  8,058  in SEI Investments on September 19, 2024 and sell it today you would earn a total of  454.00  from holding SEI Investments or generate 5.63% return on investment over 90 days.

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

SEI Investments  vs.  NETGEAR

SEI Investments

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SEI Investments are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal forward indicators, SEI Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

NETGEAR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SEI Investments and NETGEAR

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

The idea behind SEI Investments and NETGEAR 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.