Correlation Between Stepstone and SEI Investments

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

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

Diversification Opportunities for Stepstone and SEI Investments

0.93

Correlation Coefficient

Stepstone  SEI Investments

Almost no diversification

The 3 months correlation between Stepstone and SEI is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and SEI Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Investments and Stepstone 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 Stepstone Group are associated (or correlated) with SEI Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEI Investments has no effect on the direction of Stepstone i.e., Stepstone and SEI Investments go up and down completely randomly.

Pair Corralation between Stepstone and SEI Investments

Given the investment horizon of 90 days Stepstone Group is expected to under-perform the SEI Investments. In addition to that, Stepstone is 2.25 times more volatile than SEI Investments. It trades about -0.05 of its total potential returns per unit of risk. SEI Investments is currently generating about -0.08 per unit of volatility. If you would invest  8,264  in SEI Investments on December 28, 2024 and sell it today you would lose (553.00) from holding SEI Investments or give up 6.69% of portfolio value over 90 days.

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

Stepstone Group  vs.  SEI Investments

Stepstone Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stepstone Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

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 latest abnormal performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Stepstone and SEI Investments

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

The idea behind Stepstone Group and SEI Investments 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.