Correlation Between SEI Investments and Axalta Coating

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

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

Diversification Opportunities for SEI Investments and Axalta Coating

0.71

Correlation Coefficient

SEI Investments  Axalta Coating

Poor diversification

The 3 months correlation between SEI and Axalta is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding SEI Investments and Axalta Coating Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axalta Coating Systems 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 Axalta Coating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axalta Coating Systems has no effect on the direction of SEI Investments i.e., SEI Investments and Axalta Coating go up and down completely randomly.

Pair Corralation between SEI Investments and Axalta Coating

Given the investment horizon of 90 days SEI Investments is expected to generate 0.75 times more return on investment than Axalta Coating. However, SEI Investments is 1.33 times less risky than Axalta Coating. It trades about 0.12 of its potential returns per unit of risk. Axalta Coating Systems is currently generating about 0.03 per unit of risk. If you would invest  5,688  in SEI Investments on September 21, 2024 and sell it today you would earn a total of  2,459  from holding SEI Investments or generate 43.23% return on investment over 90 days.

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

SEI Investments  vs.  Axalta Coating Systems

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 abnormal forward indicators, SEI Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

Axalta Coating Systems

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SEI Investments and Axalta Coating

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

The idea behind SEI Investments and Axalta Coating Systems 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .