Correlation Between Eros Resources and Senvest Capital

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

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

Diversification Opportunities for Eros Resources and Senvest Capital

-0.49

Correlation Coefficient

Eros Resources  Senvest Capital

Very good diversification

The 3 months correlation between Eros and Senvest is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Eros Resources Corp and Senvest Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senvest Capital and Eros 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 Eros Resources 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 Eros Resources i.e., Eros Resources and Senvest Capital go up and down completely randomly.

Pair Corralation between Eros Resources and Senvest Capital

Assuming the 90 days horizon Eros Resources Corp is expected to generate 11.86 times more return on investment than Senvest Capital. However, Eros Resources is 11.86 times more volatile than Senvest Capital. It trades about 0.07 of its potential returns per unit of risk. Senvest Capital is currently generating about 0.11 per unit of risk. If you would invest  3.50  in Eros Resources Corp on August 31, 2024 and sell it today you would earn a total of  0.50  from holding Eros Resources Corp or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Eros Resources Corp  vs.  Senvest Capital

Eros Resources Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eros Resources Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Eros Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Senvest Capital

Risk-Adjusted Performance

9 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Senvest Capital are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Senvest Capital is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Eros Resources and Senvest Capital

The main advantage of trading using opposite Eros Resources and Senvest Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eros Resources 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 Eros Resources 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.