Correlation Between Senvest Capital and Liberty Defense

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

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

Diversification Opportunities for Senvest Capital and Liberty Defense

-0.15

Correlation Coefficient

Senvest Capital  Liberty Defense

Good diversification

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

Pair Corralation between Senvest Capital and Liberty Defense

Assuming the 90 days trading horizon Senvest Capital is expected to generate 2.24 times less return on investment than Liberty Defense. But when comparing it to its historical volatility, Senvest Capital is 17.56 times less risky than Liberty Defense. It trades about 0.2 of its potential returns per unit of risk. Liberty Defense Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. 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

Senvest Capital  vs.  Liberty Defense Holdings

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.

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.

Pair Trading with Senvest Capital and Liberty Defense

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

The idea behind Senvest Capital and Liberty Defense Holdings 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.