Correlation Between Definity Financial and Senvest Capital

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

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

Diversification Opportunities for Definity Financial and Senvest Capital

0.04

Correlation Coefficient

Definity Financial  Senvest Capital

Significant diversification

The 3 months correlation between Definity and Senvest is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Definity Financial Corp and Senvest Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senvest Capital and Definity Financial 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 Definity Financial Corp 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 Definity Financial i.e., Definity Financial and Senvest Capital go up and down completely randomly.

Pair Corralation between Definity Financial and Senvest Capital

Assuming the 90 days trading horizon Definity Financial is expected to generate 38.01 times less return on investment than Senvest Capital. But when comparing it to its historical volatility, Definity Financial Corp is 1.06 times less risky than Senvest Capital. It trades about 0.01 of its potential returns per unit of risk. Senvest Capital is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  32,500  in Senvest Capital on October 23, 2024 and sell it today you would earn a total of  5,300  from holding Senvest Capital or generate 16.31% return on investment over 90 days.

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

Definity Financial Corp  vs.  Senvest Capital

Definity Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Definity Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Definity Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Senvest Capital

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Senvest Capital are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Senvest Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Definity Financial and Senvest Capital

The main advantage of trading using opposite Definity Financial and Senvest Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Definity Financial 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 Definity Financial Corp 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.