Correlation Between SEI Investments and Global Indemnity

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

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

Diversification Opportunities for SEI Investments and Global Indemnity

0.89

Correlation Coefficient

SEI Investments  Global Indemnity

Very poor diversification

The 3 months correlation between SEI and Global is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding SEI Investments and Global Indemnity PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Indemnity PLC 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 Global Indemnity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Indemnity PLC has no effect on the direction of SEI Investments i.e., SEI Investments and Global Indemnity go up and down completely randomly.

Pair Corralation between SEI Investments and Global Indemnity

Given the investment horizon of 90 days SEI Investments is expected to generate 0.89 times more return on investment than Global Indemnity. However, SEI Investments is 1.13 times less risky than Global Indemnity. It trades about 0.34 of its potential returns per unit of risk. Global Indemnity PLC is currently generating about 0.14 per unit of risk. If you would invest  6,682  in SEI Investments on September 13, 2024 and sell it today you would earn a total of  1,860  from holding SEI Investments or generate 27.84% 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.  Global Indemnity PLC

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

Global Indemnity PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Indemnity PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak essential indicators, Global Indemnity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SEI Investments and Global Indemnity

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

The idea behind SEI Investments and Global Indemnity PLC 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.