Correlation Between Altius Renewable and Ormat Technologies

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

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

Diversification Opportunities for Altius Renewable and Ormat Technologies

0.45

Correlation Coefficient

Altius Renewable  Ormat Technologies

Very weak diversification

The 3 months correlation between Altius and Ormat is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Altius Renewable Royalties and Ormat Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ormat Technologies and Altius Renewable 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 Altius Renewable Royalties 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 Altius Renewable i.e., Altius Renewable and Ormat Technologies go up and down completely randomly.

Pair Corralation between Altius Renewable and Ormat Technologies

Assuming the 90 days horizon Altius Renewable Royalties is expected to generate 1.1 times more return on investment than Ormat Technologies. However, Altius Renewable is 1.1 times more volatile than Ormat Technologies. It trades about 0.19 of its potential returns per unit of risk. Ormat Technologies is currently generating about 0.15 per unit of risk. If you would invest  718.00  in Altius Renewable Royalties on September 3, 2024 and sell it today you would earn a total of  127.00  from holding Altius Renewable Royalties or generate 17.69% return on investment over 90 days.

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

Altius Renewable Royalties  vs.  Ormat Technologies

Altius Renewable Roy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Altius Renewable Royalties are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Altius Renewable reported solid returns over the last few months and may actually be approaching a breakup point.

Ormat Technologies

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ormat Technologies are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Ormat Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Altius Renewable and Ormat Technologies

The main advantage of trading using opposite Altius Renewable and Ormat Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altius Renewable 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 Altius Renewable Royalties 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.