Correlation Between SEI Investments and EMCOR

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

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

Diversification Opportunities for SEI Investments and EMCOR

0.84

Correlation Coefficient

SEI Investments  EMCOR

Very poor diversification

The 3 months correlation between SEI and EMCOR is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding SEI Investments and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group 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 EMCOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCOR Group has no effect on the direction of SEI Investments i.e., SEI Investments and EMCOR go up and down completely randomly.

Pair Corralation between SEI Investments and EMCOR

Given the investment horizon of 90 days SEI Investments is expected to generate 0.68 times more return on investment than EMCOR. However, SEI Investments is 1.48 times less risky than EMCOR. It trades about 0.28 of its potential returns per unit of risk. EMCOR Group is currently generating about 0.1 per unit of risk. If you would invest  6,918  in SEI Investments on September 19, 2024 and sell it today you would earn a total of  1,594  from holding SEI Investments or generate 23.04% return on investment over 90 days.

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

SEI Investments  vs.  EMCOR Group

SEI Investments

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SEI Investments are ranked lower than 22 (%) 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.

EMCOR Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMCOR Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, EMCOR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SEI Investments and EMCOR

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

The idea behind SEI Investments and EMCOR Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.