Correlation Between SEI Investments and Babcock Wilcox

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

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

Diversification Opportunities for SEI Investments and Babcock Wilcox

0.46

Correlation Coefficient

SEI Investments  Babcock Wilcox

Very weak diversification

The 3 months correlation between SEI and Babcock is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding SEI Investments and Babcock Wilcox Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Babcock Wilcox Enter 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 Babcock Wilcox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Babcock Wilcox Enter has no effect on the direction of SEI Investments i.e., SEI Investments and Babcock Wilcox go up and down completely randomly.

Pair Corralation between SEI Investments and Babcock Wilcox

Given the investment horizon of 90 days SEI Investments is expected to generate 1.01 times more return on investment than Babcock Wilcox. However, SEI Investments is 1.01 times more volatile than Babcock Wilcox Enterprises. It trades about 0.34 of its potential returns per unit of risk. Babcock Wilcox Enterprises is currently generating about 0.1 per unit of risk. If you would invest  6,658  in SEI Investments on September 12, 2024 and sell it today you would earn a total of  1,916  from holding SEI Investments or generate 28.78% return on investment over 90 days.

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

SEI Investments  vs.  Babcock Wilcox Enterprises

SEI Investments

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SEI Investments are ranked lower than 27 (%) 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.

Babcock Wilcox Enter

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Babcock Wilcox Enterprises are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Babcock Wilcox may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SEI Investments and Babcock Wilcox

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

The idea behind SEI Investments and Babcock Wilcox Enterprises 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.