Correlation Between Senvest Capital and Empire Company

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

By analyzing existing cross correlation between Senvest Capital and Empire Company Limited, you can compare the effects of market volatilities on Senvest Capital and Empire Company 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 Empire Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Senvest Capital and Empire Company.

Diversification Opportunities for Senvest Capital and Empire Company

0.42

Correlation Coefficient

Senvest Capital  Empire Company

Very weak diversification

The 3 months correlation between Senvest and Empire is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Senvest Capital and Empire Company Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Limited 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 Empire Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Limited has no effect on the direction of Senvest Capital i.e., Senvest Capital and Empire Company go up and down completely randomly.

Pair Corralation between Senvest Capital and Empire Company

Assuming the 90 days trading horizon Senvest Capital is expected to generate 1.26 times more return on investment than Empire Company. However, Senvest Capital is 1.26 times more volatile than Empire Company Limited. It trades about 0.4 of its potential returns per unit of risk. Empire Company Limited is currently generating about 0.1 per unit of risk. If you would invest  34,400  in Senvest Capital on October 6, 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	Weak
Accuracy	100.0%
Values	Daily Returns

Senvest Capital  vs.  Empire Company Limited

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 unfluctuating fundamental indicators, Senvest Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

Empire Limited

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Company Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Empire Company may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Senvest Capital and Empire Company

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

The idea behind Senvest Capital and Empire Company Limited 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.