Correlation Between SEI Investments and Bank of America

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

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

Diversification Opportunities for SEI Investments and Bank of America

-0.25

Correlation Coefficient

SEI Investments  Bank of America

Very good diversification

The 3 months correlation between SEI and Bank is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding SEI Investments and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of SEI Investments i.e., SEI Investments and Bank of America go up and down completely randomly.

Pair Corralation between SEI Investments and Bank of America

Given the investment horizon of 90 days SEI Investments is expected to generate 2.55 times more return on investment than Bank of America. However, SEI Investments is 2.55 times more volatile than Bank of America. It trades about 0.28 of its potential returns per unit of risk. Bank of America is currently generating about -0.02 per unit of risk. If you would invest  8,134  in SEI Investments on September 12, 2024 and sell it today you would earn a total of  408.00  from holding SEI Investments or generate 5.02% return on investment over 90 days.

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

SEI Investments  vs.  Bank of America

SEI Investments

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SEI Investments are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating forward indicators, SEI Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

Bank of America

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Bank of America is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with SEI Investments and Bank of America

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

The idea behind SEI Investments and Bank of America 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.