Correlation Between SEI Exchange and SPDR SP

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

By analyzing existing cross correlation between SEI Exchange Traded and SPDR SP 500, you can compare the effects of market volatilities on SEI Exchange and SPDR SP 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 Exchange with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of SEI Exchange and SPDR SP.

Diversification Opportunities for SEI Exchange and SPDR SP

0.81

Correlation Coefficient

SEI Exchange  SPDR SP

Very poor diversification

The 3 months correlation between SEI and SPDR is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding SEI Exchange Traded and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 and SEI Exchange 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 Exchange Traded are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 500 has no effect on the direction of SEI Exchange i.e., SEI Exchange and SPDR SP go up and down completely randomly.

Pair Corralation between SEI Exchange and SPDR SP

Given the investment horizon of 90 days SEI Exchange Traded is expected to under-perform the SPDR SP. But the etf apears to be less risky and, when comparing its historical volatility, SEI Exchange Traded is 1.22 times less risky than SPDR SP. The etf trades about -0.02 of its potential returns per unit of risk. The SPDR SP 500 is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  58,236  in SPDR SP 500 on October 12, 2024 and sell it today you would earn a total of  713.00  from holding SPDR SP 500 or generate 1.22% return on investment over 90 days.

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

SEI Exchange Traded  vs.  SPDR SP 500

SEI Exchange Traded

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SEI Exchange Traded has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, SEI Exchange is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

SPDR SP 500

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, SPDR SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SEI Exchange and SPDR SP

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

The idea behind SEI Exchange Traded and SPDR SP 500 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.