Correlation Between Energy Vault and Ormat Technologies

Can any of the company-specific risk be diversified away by investing in both Energy Vault 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 Energy Vault and Ormat Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Energy Vault Holdings and Ormat Technologies, you can compare the effects of market volatilities on Energy Vault 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 Energy Vault with a short position of Ormat Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Vault and Ormat Technologies.

Diversification Opportunities for Energy Vault and Ormat Technologies

0.73

Correlation Coefficient

Energy Vault  Ormat Technologies

Poor diversification

The 3 months correlation between Energy and Ormat is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Energy Vault Holdings and Ormat Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ormat Technologies and Energy Vault 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 Energy Vault Holdings 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 Energy Vault i.e., Energy Vault and Ormat Technologies go up and down completely randomly.

Pair Corralation between Energy Vault and Ormat Technologies

Given the investment horizon of 90 days Energy Vault Holdings is expected to generate 8.45 times more return on investment than Ormat Technologies. However, Energy Vault is 8.45 times more volatile than Ormat Technologies. It trades about 0.31 of its potential returns per unit of risk. Ormat Technologies is currently generating about 0.07 per unit of risk. If you would invest  94.00  in Energy Vault Holdings on July 29, 2024 and sell it today you would earn a total of  72.00  from holding Energy Vault Holdings or generate 76.6% return on investment over 90 days.

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

Energy Vault Holdings  vs.  Ormat Technologies

Energy Vault Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Vault Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Energy Vault showed solid returns over the last few months and may actually be approaching a breakup point.

Ormat Technologies

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ormat Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ormat Technologies is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Energy Vault and Ormat Technologies

The main advantage of trading using opposite Energy Vault and Ormat Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Vault 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' long position.

The idea behind Energy Vault Holdings 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.