Correlation Between Ormat Technologies and Renew Energy

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

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

Diversification Opportunities for Ormat Technologies and Renew Energy

-0.63

Correlation Coefficient

Ormat Technologies  Renew Energy

Excellent diversification

The 3 months correlation between Ormat and Renew is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ormat Technologies and Renew Energy Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renew Energy Global 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 Renew Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renew Energy Global has no effect on the direction of Ormat Technologies i.e., Ormat Technologies and Renew Energy go up and down completely randomly.

Pair Corralation between Ormat Technologies and Renew Energy

Considering the 90-day investment horizon Ormat Technologies is expected to generate 0.8 times more return on investment than Renew Energy. However, Ormat Technologies is 1.25 times less risky than Renew Energy. It trades about 0.06 of its potential returns per unit of risk. Renew Energy Global is currently generating about -0.07 per unit of risk. If you would invest  6,636  in Ormat Technologies on January 12, 2025 and sell it today you would earn a total of  367.00  from holding Ormat Technologies or generate 5.53% return on investment over 90 days.

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

Ormat Technologies  vs.  Renew Energy Global

Ormat Technologies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ormat Technologies are ranked lower than 4 (%) 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.

Renew Energy Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Renew Energy Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Ormat Technologies and Renew Energy

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

The idea behind Ormat Technologies and Renew Energy Global 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.