Correlation Between Philip Morris and SEI Investments

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

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

Diversification Opportunities for Philip Morris and SEI Investments

0.64

Correlation Coefficient

Philip Morris  SEI Investments

Poor diversification

The 3 months correlation between Philip and SEI is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and SEI Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Investments and Philip Morris 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 Philip Morris International 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 Philip Morris i.e., Philip Morris and SEI Investments go up and down completely randomly.

Pair Corralation between Philip Morris and SEI Investments

Allowing for the 90-day total investment horizon Philip Morris is expected to generate 2.71 times less return on investment than SEI Investments. In addition to that, Philip Morris is 1.48 times more volatile than SEI Investments. It trades about 0.07 of its total potential returns per unit of risk. SEI Investments is currently generating about 0.28 per unit of volatility. If you would invest  6,727  in SEI Investments on September 3, 2024 and sell it today you would earn a total of  1,536  from holding SEI Investments or generate 22.83% return on investment over 90 days.

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

Philip Morris International  vs.  SEI Investments

Philip Morris Intern

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Philip Morris may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SEI Investments

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SEI Investments are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, SEI Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Philip Morris and SEI Investments

The main advantage of trading using opposite Philip Morris and SEI Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philip Morris 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 Philip Morris International 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.