Correlation Between Franklin Resources and SEI Investments

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

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

Diversification Opportunities for Franklin Resources and SEI Investments

0.49

Correlation Coefficient

Franklin Resources  SEI Investments

Very weak diversification

The 3 months correlation between Franklin and SEI is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Resources and SEI Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Investments and Franklin Resources 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 Franklin Resources are associated (or correlated) with SEI Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEI Investments has no effect on the direction of Franklin Resources i.e., Franklin Resources and SEI Investments go up and down completely randomly.

Pair Corralation between Franklin Resources and SEI Investments

Considering the 90-day investment horizon Franklin Resources is expected to under-perform the SEI Investments. In addition to that, Franklin Resources is 2.14 times more volatile than SEI Investments. It trades about -0.4 of its total potential returns per unit of risk. SEI Investments is currently generating about -0.28 per unit of volatility. If you would invest  7,056  in SEI Investments on February 2, 2024 and sell it today you would lose (396.00) from holding SEI Investments or give up 5.61% of portfolio value over 90 days.

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

Franklin Resources  vs.  SEI Investments

Franklin Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

SEI Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SEI Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, SEI Investments is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Franklin Resources and SEI Investments

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

The idea behind Franklin Resources and SEI Investments 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.