Correlation Between SEI Investments and Visa

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

By analyzing existing cross correlation between SEI Investments and Visa Class A, you can compare the effects of market volatilities on SEI Investments and Visa 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 Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of SEI Investments and Visa.

Diversification Opportunities for SEI Investments and Visa

0.81

Correlation Coefficient

SEI Investments  Visa

Very poor diversification

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

Pair Corralation between SEI Investments and Visa

Given the investment horizon of 90 days SEI Investments is expected to generate 1.33 times less return on investment than Visa. In addition to that, SEI Investments is 1.07 times more volatile than Visa Class A. It trades about 0.06 of its total potential returns per unit of risk. Visa Class A is currently generating about 0.08 per unit of volatility. If you would invest  20,584  in Visa Class A on August 20, 2024 and sell it today you would earn a total of  10,380  from holding Visa Class A or generate 50.43% return on investment over 90 days.

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

SEI Investments  vs.  Visa Class A

SEI Investments

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SEI Investments are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal forward indicators, SEI Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

Visa Class A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SEI Investments and Visa

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

The idea behind SEI Investments and Visa Class A 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.