Correlation Between SEI Investments and Transphorm Technology

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

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

Diversification Opportunities for SEI Investments and Transphorm Technology

0.53

Correlation Coefficient

SEI Investments  Transphorm Technology

Very weak diversification

The 3 months correlation between SEI and Transphorm is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding SEI Investments and Transphorm Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transphorm Technology 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 Transphorm Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transphorm Technology has no effect on the direction of SEI Investments i.e., SEI Investments and Transphorm Technology go up and down completely randomly.

Pair Corralation between SEI Investments and Transphorm Technology

Given the investment horizon of 90 days SEI Investments is expected to generate 1.19 times less return on investment than Transphorm Technology. But when comparing it to its historical volatility, SEI Investments is 3.14 times less risky than Transphorm Technology. It trades about 0.04 of its potential returns per unit of risk. Transphorm Technology is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  551.00  in Transphorm Technology on March 28, 2024 and sell it today you would lose (41.00) from holding Transphorm Technology or give up 7.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.58%
Values	Daily Returns

SEI Investments  vs.  Transphorm Technology

SEI Investments

Risk-Adjusted Performance

0 of 100

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 unfluctuating 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.

Transphorm Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Transphorm Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Transphorm Technology is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SEI Investments and Transphorm Technology

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

The idea behind SEI Investments and Transphorm Technology 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.