Correlation Between Senvest Capital and Richelieu Hardware

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

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

Diversification Opportunities for Senvest Capital and Richelieu Hardware

0.11

Correlation Coefficient

Senvest Capital  Richelieu Hardware

Average diversification

The 3 months correlation between Senvest and Richelieu is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Senvest Capital and Richelieu Hardware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richelieu Hardware 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 Richelieu Hardware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richelieu Hardware has no effect on the direction of Senvest Capital i.e., Senvest Capital and Richelieu Hardware go up and down completely randomly.

Pair Corralation between Senvest Capital and Richelieu Hardware

Assuming the 90 days trading horizon Senvest Capital is expected to generate 0.44 times more return on investment than Richelieu Hardware. However, Senvest Capital is 2.27 times less risky than Richelieu Hardware. It trades about 0.42 of its potential returns per unit of risk. Richelieu Hardware is currently generating about -0.06 per unit of risk. If you would invest  33,000  in Senvest Capital on September 23, 2024 and sell it today you would earn a total of  2,000  from holding Senvest Capital or generate 6.06% return on investment over 90 days.

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

Senvest Capital  vs.  Richelieu Hardware

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 unfluctuating fundamental indicators, Senvest Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Richelieu Hardware

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Senvest Capital and Richelieu Hardware

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

The idea behind Senvest Capital and Richelieu Hardware 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.