Correlation Between Liberty Defense and Senvest Capital

Can any of the company-specific risk be diversified away by investing in both Liberty Defense and Senvest Capital 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 Liberty Defense and Senvest Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Liberty Defense Holdings and Senvest Capital, you can compare the effects of market volatilities on Liberty Defense and Senvest Capital 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 Liberty Defense with a short position of Senvest Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Defense and Senvest Capital.

Diversification Opportunities for Liberty Defense and Senvest Capital

-0.15

Correlation Coefficient

Liberty Defense  Senvest Capital

Good diversification

The 3 months correlation between Liberty and Senvest is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Defense Holdings and Senvest Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senvest Capital and Liberty Defense 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 Liberty Defense Holdings are associated (or correlated) with Senvest Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senvest Capital has no effect on the direction of Liberty Defense i.e., Liberty Defense and Senvest Capital go up and down completely randomly.

Pair Corralation between Liberty Defense and Senvest Capital

Assuming the 90 days trading horizon Liberty Defense Holdings is expected to generate 17.56 times more return on investment than Senvest Capital. However, Liberty Defense is 17.56 times more volatile than Senvest Capital. It trades about 0.03 of its potential returns per unit of risk. Senvest Capital is currently generating about 0.2 per unit of risk. If you would invest  93.00  in Liberty Defense Holdings on September 18, 2024 and sell it today you would lose (9.00) from holding Liberty Defense Holdings or give up 9.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Liberty Defense Holdings  vs.  Senvest Capital

Liberty Defense Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Defense Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Liberty Defense showed solid returns over the last few months and may actually be approaching a breakup point.

Senvest Capital

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Senvest Capital are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Senvest Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Liberty Defense and Senvest Capital

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

The idea behind Liberty Defense Holdings and Senvest Capital 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.