Correlation Between KEYBANK and SEI Investments

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

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

Diversification Opportunities for KEYBANK and SEI Investments

0.44

Correlation Coefficient

KEYBANK  SEI Investments

Very weak diversification

The 3 months correlation between KEYBANK and SEI is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding KEYBANK NATL ASSN and SEI Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Investments and KEYBANK 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 KEYBANK NATL ASSN 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 KEYBANK i.e., KEYBANK and SEI Investments go up and down completely randomly.

Pair Corralation between KEYBANK and SEI Investments

Assuming the 90 days trading horizon KEYBANK is expected to generate 2.13 times less return on investment than SEI Investments. But when comparing it to its historical volatility, KEYBANK NATL ASSN is 1.84 times less risky than SEI Investments. It trades about 0.07 of its potential returns per unit of risk. SEI Investments is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5,974  in SEI Investments on October 4, 2024 and sell it today you would earn a total of  2,207  from holding SEI Investments or generate 36.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	60.43%
Values	Daily Returns

KEYBANK NATL ASSN  vs.  SEI Investments

KEYBANK NATL ASSN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEYBANK NATL ASSN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KEYBANK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SEI Investments

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SEI Investments are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent forward indicators, SEI Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KEYBANK and SEI Investments

The main advantage of trading using opposite KEYBANK and SEI Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KEYBANK 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 KEYBANK NATL ASSN 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.