Correlation Between Dow Jones and SEI Exchange
Can any of the company-specific risk be diversified away by investing in both Dow Jones and SEI Exchange 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 Dow Jones and SEI Exchange into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and SEI Exchange Traded, you can compare the effects of market volatilities on Dow Jones and SEI Exchange 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 Dow Jones with a short position of SEI Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and SEI Exchange.
Diversification Opportunities for Dow Jones and SEI Exchange
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and SEI is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and SEI Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Exchange Traded and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with SEI Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEI Exchange Traded has no effect on the direction of Dow Jones i.e., Dow Jones and SEI Exchange go up and down completely randomly.
Pair Corralation between Dow Jones and SEI Exchange
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.75 times less return on investment than SEI Exchange. But when comparing it to its historical volatility, Dow Jones Industrial is 1.27 times less risky than SEI Exchange. It trades about 0.08 of its potential returns per unit of risk. SEI Exchange Traded is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,507 in SEI Exchange Traded on September 3, 2024 and sell it today you would earn a total of 1,535 from holding SEI Exchange Traded or generate 61.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. SEI Exchange Traded
Performance |
| Timeline |
Dow Jones and SEI Exchange Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
SEI Exchange Traded
Pair trading matchups for SEI Exchange
Pair Trading with Dow Jones and SEI Exchange
The main advantage of trading using opposite Dow Jones and SEI Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, SEI Exchange 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 SEI Exchange will offset losses from the drop in SEI Exchange's long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| SEI Exchange vs. SEI Exchange Traded | SEI Exchange vs. SEI Exchange Traded | SEI Exchange vs. SEI Exchange Traded | SEI Exchange vs. Listed Funds Trust |
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.
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