Correlation Between First National and Senvest Capital

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

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

Diversification Opportunities for First National and Senvest Capital

0.81

Correlation Coefficient

First National  Senvest Capital

Very poor diversification

The 3 months correlation between First and Senvest is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding First National Financial and Senvest Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senvest Capital and First National 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 First National Financial 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 First National i.e., First National and Senvest Capital go up and down completely randomly.

Pair Corralation between First National and Senvest Capital

Assuming the 90 days trading horizon First National is expected to generate 6.23 times less return on investment than Senvest Capital. But when comparing it to its historical volatility, First National Financial is 1.03 times less risky than Senvest Capital. It trades about 0.07 of its potential returns per unit of risk. Senvest Capital is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  34,400  in Senvest Capital on October 8, 2024 and sell it today you would earn a total of  5,100  from holding Senvest Capital or generate 14.83% return on investment over 90 days.

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

First National Financial  vs.  Senvest Capital

First National Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First National Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, First National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Senvest Capital

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Senvest Capital are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Senvest Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First National and Senvest Capital

The main advantage of trading using opposite First National and Senvest Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First National 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 First National Financial 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 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.