Correlation Between SEI INVESTMENTS and North American

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Can any of the company-specific risk be diversified away by investing in both SEI INVESTMENTS and North 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 North 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 North American Construction, you can compare the effects of market volatilities on SEI INVESTMENTS and North 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of SEI INVESTMENTS and North American.

Diversification Opportunities for SEI INVESTMENTS and North American

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between SEI and North is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding SEI INVESTMENTS and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of SEI INVESTMENTS i.e., SEI INVESTMENTS and North American go up and down completely randomly.

Pair Corralation between SEI INVESTMENTS and North American

Assuming the 90 days trading horizon SEI INVESTMENTS is expected to generate 0.43 times more return on investment than North American. However, SEI INVESTMENTS is 2.35 times less risky than North American. It trades about 0.14 of its potential returns per unit of risk. North American Construction is currently generating about 0.03 per unit of risk. If you would invest  5,806  in SEI INVESTMENTS on September 20, 2024 and sell it today you would earn a total of  2,344  from holding SEI INVESTMENTS or generate 40.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

SEI INVESTMENTS  vs.  North American Construction

 Performance 
       Timeline  
SEI INVESTMENTS 

Risk-Adjusted Performance

26 of 100

 
Weak
 
Strong
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in SEI INVESTMENTS are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, SEI INVESTMENTS unveiled solid returns over the last few months and may actually be approaching a breakup point.
North American Const 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in North American Construction are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, North American reported solid returns over the last few months and may actually be approaching a breakup point.

SEI INVESTMENTS and North American Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SEI INVESTMENTS and North American

The main advantage of trading using opposite SEI INVESTMENTS and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SEI INVESTMENTS position performs unexpectedly, North 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 North American will offset losses from the drop in North American's long position.
The idea behind SEI INVESTMENTS and North American Construction 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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