Correlation Between Clearway Energy and Ormat Technologies

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

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

Diversification Opportunities for Clearway Energy and Ormat Technologies

-0.23

Correlation Coefficient

Clearway Energy  Ormat Technologies

Very good diversification

The 3 months correlation between Clearway and Ormat is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Clearway Energy Class and Ormat Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ormat Technologies and Clearway Energy 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 Clearway Energy Class 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 Clearway Energy i.e., Clearway Energy and Ormat Technologies go up and down completely randomly.

Pair Corralation between Clearway Energy and Ormat Technologies

Given the investment horizon of 90 days Clearway Energy is expected to generate 1.97 times less return on investment than Ormat Technologies. In addition to that, Clearway Energy is 1.61 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 0.15 per unit of volatility. If you would invest  7,261  in Ormat Technologies on September 3, 2024 and sell it today you would earn a total of  910.00  from holding Ormat Technologies or generate 12.53% return on investment over 90 days.

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

Clearway Energy Class  vs.  Ormat Technologies

Clearway Energy Class

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Clearway Energy Class are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Clearway Energy is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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 Clearway Energy and Ormat Technologies

The main advantage of trading using opposite Clearway Energy and Ormat Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clearway Energy 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 Clearway Energy Class 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..