Correlation Between SOUTHERN and SEI Investments

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

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

Diversification Opportunities for SOUTHERN and SEI Investments

-0.06

Correlation Coefficient

SOUTHERN  SEI Investments

Good diversification

The 3 months correlation between SOUTHERN and SEI is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHERN PER CORP and SEI Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Investments and SOUTHERN 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 SOUTHERN PER CORP 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 SOUTHERN i.e., SOUTHERN and SEI Investments go up and down completely randomly.

Pair Corralation between SOUTHERN and SEI Investments

Assuming the 90 days trading horizon SOUTHERN PER CORP is expected to generate 0.25 times more return on investment than SEI Investments. However, SOUTHERN PER CORP is 3.98 times less risky than SEI Investments. It trades about -0.26 of its potential returns per unit of risk. SEI Investments is currently generating about -0.26 per unit of risk. If you would invest  9,964  in SOUTHERN PER CORP on October 14, 2024 and sell it today you would lose (195.00) from holding SOUTHERN PER CORP or give up 1.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

SOUTHERN PER CORP  vs.  SEI Investments

SOUTHERN PER P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOUTHERN PER CORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SOUTHERN 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

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SEI Investments are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent forward indicators, SEI Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SOUTHERN and SEI Investments

The main advantage of trading using opposite SOUTHERN and SEI Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOUTHERN 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 SOUTHERN PER CORP 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.