Correlation Between Microsoft and SEI Exchange
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and SEI Exchange into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and SEI Exchange Traded, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of SEI Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and SEI Exchange.
Diversification Opportunities for Microsoft and SEI Exchange
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Microsoft and SEI is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and SEI Exchange go up and down completely randomly.
Pair Corralation between Microsoft and SEI Exchange
Given the investment horizon of 90 days Microsoft is expected to generate 1.0 times more return on investment than SEI Exchange. However, Microsoft is 1.0 times less risky than SEI Exchange. It trades about -0.03 of its potential returns per unit of risk. SEI Exchange Traded is currently generating about -0.05 per unit of risk. If you would invest 41,634 in Microsoft on January 10, 2025 and sell it today you would lose (2,585) from holding Microsoft or give up 6.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. SEI Exchange Traded
Performance |
| Timeline |
| Microsoft |
| SEI Exchange Traded |
Microsoft and SEI Exchange Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and SEI Exchange
The main advantage of trading using opposite Microsoft and SEI Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings | Microsoft vs. Oracle |
| SEI Exchange vs. Invesco NASDAQ Next | SEI Exchange vs. SPDR Portfolio SP | SEI Exchange vs. SPDR Portfolio SP | SEI Exchange vs. Schwab Dividend Equity |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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