Correlation Between Ormat Technologies and Energy Vault

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

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

Diversification Opportunities for Ormat Technologies and Energy Vault

0.73

Correlation Coefficient

Ormat Technologies  Energy Vault

Poor diversification

The 3 months correlation between Ormat and Energy is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ormat Technologies and Energy Vault Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Vault Holdings and Ormat Technologies 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 Ormat Technologies are associated (or correlated) with Energy Vault. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Vault Holdings has no effect on the direction of Ormat Technologies i.e., Ormat Technologies and Energy Vault go up and down completely randomly.

Pair Corralation between Ormat Technologies and Energy Vault

Considering the 90-day investment horizon Ormat Technologies is expected to generate 34.52 times less return on investment than Energy Vault. But when comparing it to its historical volatility, Ormat Technologies is 8.45 times less risky than Energy Vault. It trades about 0.07 of its potential returns per unit of risk. Energy Vault Holdings is currently generating about 0.31 of returns per unit of risk over similar time horizon. 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

Ormat Technologies  vs.  Energy Vault Holdings

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.

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.

Pair Trading with Ormat Technologies and Energy Vault

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

The idea behind Ormat Technologies and Energy Vault Holdings 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.