Correlation Between AUST AGRICULTURAL and ORMAT TECHNOLOGIES

Can any of the company-specific risk be diversified away by investing in both AUST AGRICULTURAL and ORMAT TECHNOLOGIES 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 AUST AGRICULTURAL and ORMAT TECHNOLOGIES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AUST AGRICULTURAL and ORMAT TECHNOLOGIES, you can compare the effects of market volatilities on AUST AGRICULTURAL and ORMAT TECHNOLOGIES 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 AUST AGRICULTURAL with a short position of ORMAT TECHNOLOGIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUST AGRICULTURAL and ORMAT TECHNOLOGIES.

Diversification Opportunities for AUST AGRICULTURAL and ORMAT TECHNOLOGIES

0.21

Correlation Coefficient

AUST AGRICULTURAL  ORMAT TECHNOLOGIES

Modest diversification

The 3 months correlation between AUST and ORMAT is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding AUST AGRICULTURAL and ORMAT TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORMAT TECHNOLOGIES and AUST AGRICULTURAL 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 AUST AGRICULTURAL are associated (or correlated) with ORMAT TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ORMAT TECHNOLOGIES has no effect on the direction of AUST AGRICULTURAL i.e., AUST AGRICULTURAL and ORMAT TECHNOLOGIES go up and down completely randomly.

Pair Corralation between AUST AGRICULTURAL and ORMAT TECHNOLOGIES

Assuming the 90 days trading horizon AUST AGRICULTURAL is expected to generate 34.54 times less return on investment than ORMAT TECHNOLOGIES. In addition to that, AUST AGRICULTURAL is 1.02 times more volatile than ORMAT TECHNOLOGIES. It trades about 0.0 of its total potential returns per unit of risk. ORMAT TECHNOLOGIES is currently generating about 0.08 per unit of volatility. If you would invest  6,476  in ORMAT TECHNOLOGIES on August 18, 2024 and sell it today you would earn a total of  1,114  from holding ORMAT TECHNOLOGIES or generate 17.2% return on investment over 90 days.

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

AUST AGRICULTURAL  vs.  ORMAT TECHNOLOGIES

AUST AGRICULTURAL

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AUST AGRICULTURAL are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AUST AGRICULTURAL is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

ORMAT TECHNOLOGIES

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ORMAT TECHNOLOGIES are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ORMAT TECHNOLOGIES unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AUST AGRICULTURAL and ORMAT TECHNOLOGIES

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

The idea behind AUST AGRICULTURAL and ORMAT TECHNOLOGIES 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 Stocks Directory module to find actively traded stocks across global markets.