Correlation Between WisdomTree Emerging and SEI Select

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Can any of the company-specific risk be diversified away by investing in both WisdomTree Emerging and SEI Select 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 WisdomTree Emerging and SEI Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Emerging Markets and SEI Select Emerging, you can compare the effects of market volatilities on WisdomTree Emerging and SEI Select 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 WisdomTree Emerging with a short position of SEI Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Emerging and SEI Select.

Diversification Opportunities for WisdomTree Emerging and SEI Select

WisdomTreeSEIDiversified AwayWisdomTreeSEIDiversified Away100%
0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between WisdomTree and SEI is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and SEI Select Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Select Emerging and WisdomTree Emerging 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 WisdomTree Emerging Markets are associated (or correlated) with SEI Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEI Select Emerging has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and SEI Select go up and down completely randomly.

Pair Corralation between WisdomTree Emerging and SEI Select

Given the investment horizon of 90 days WisdomTree Emerging is expected to generate 1.81 times less return on investment than SEI Select. In addition to that, WisdomTree Emerging is 1.04 times more volatile than SEI Select Emerging. It trades about 0.15 of its total potential returns per unit of risk. SEI Select Emerging is currently generating about 0.28 per unit of volatility. If you would invest  2,399  in SEI Select Emerging on November 25, 2024 and sell it today you would earn a total of  119.00  from holding SEI Select Emerging or generate 4.96% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

WisdomTree Emerging Markets  vs.  SEI Select Emerging

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -4-2024
JavaScript chart by amCharts 3.21.15XSOE SEEM
       Timeline  
WisdomTree Emerging 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Emerging Markets are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, WisdomTree Emerging is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb29.53030.53131.53232.5
SEI Select Emerging 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in SEI Select Emerging are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, SEI Select is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2323.52424.52525.5

WisdomTree Emerging and SEI Select Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.45-1.84-1.22-0.610.00.611.251.892.523.16 0.10.20.30.40.50.6
JavaScript chart by amCharts 3.21.15XSOE SEEM
       Returns  

Pair Trading with WisdomTree Emerging and SEI Select

The main advantage of trading using opposite WisdomTree Emerging and SEI Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Emerging position performs unexpectedly, SEI Select 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 Select will offset losses from the drop in SEI Select's long position.
The idea behind WisdomTree Emerging Markets and SEI Select Emerging 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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