Correlation Between Smart Powerr and Ormat Technologies

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

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

Diversification Opportunities for Smart Powerr and Ormat Technologies

0.54

Correlation Coefficient

Smart Powerr  Ormat Technologies

Very weak diversification

The 3 months correlation between Smart and Ormat is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Smart Powerr Corp and Ormat Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ormat Technologies and Smart Powerr 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 Smart Powerr Corp 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 Smart Powerr i.e., Smart Powerr and Ormat Technologies go up and down completely randomly.

Pair Corralation between Smart Powerr and Ormat Technologies

Given the investment horizon of 90 days Smart Powerr Corp is expected to under-perform the Ormat Technologies. In addition to that, Smart Powerr is 2.94 times more volatile than Ormat Technologies. It trades about -0.05 of its total potential returns per unit of risk. Ormat Technologies is currently generating about 0.04 per unit of volatility. If you would invest  6,780  in Ormat Technologies on December 27, 2024 and sell it today you would earn a total of  201.00  from holding Ormat Technologies or generate 2.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Smart Powerr Corp  vs.  Ormat Technologies

Smart Powerr Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smart Powerr Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Ormat Technologies

Risk-Adjusted Performance

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 Smart Powerr and Ormat Technologies

The main advantage of trading using opposite Smart Powerr and Ormat Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smart Powerr 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 Smart Powerr Corp 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.

Check out your portfolio center.

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.