Correlation Between ORMAT TECHNOLOGIES and Hon Hai

Can any of the company-specific risk be diversified away by investing in both ORMAT TECHNOLOGIES and Hon Hai 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 Hon Hai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ORMAT TECHNOLOGIES and Hon Hai Precision, you can compare the effects of market volatilities on ORMAT TECHNOLOGIES and Hon Hai 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 Hon Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of ORMAT TECHNOLOGIES and Hon Hai.

Diversification Opportunities for ORMAT TECHNOLOGIES and Hon Hai

-0.12

Correlation Coefficient

ORMAT TECHNOLOGIES  Hon Hai

Good diversification

The 3 months correlation between ORMAT and Hon is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding ORMAT TECHNOLOGIES and Hon Hai Precision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hon Hai Precision 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 Hon Hai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hon Hai Precision has no effect on the direction of ORMAT TECHNOLOGIES i.e., ORMAT TECHNOLOGIES and Hon Hai go up and down completely randomly.

Pair Corralation between ORMAT TECHNOLOGIES and Hon Hai

Assuming the 90 days trading horizon ORMAT TECHNOLOGIES is expected to generate 0.42 times more return on investment than Hon Hai. However, ORMAT TECHNOLOGIES is 2.41 times less risky than Hon Hai. It trades about 0.02 of its potential returns per unit of risk. Hon Hai Precision is currently generating about -0.04 per unit of risk. If you would invest  6,429  in ORMAT TECHNOLOGIES on December 29, 2024 and sell it today you would earn a total of  59.00  from holding ORMAT TECHNOLOGIES or generate 0.92% return on investment over 90 days.

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

ORMAT TECHNOLOGIES  vs.  Hon Hai Precision

ORMAT TECHNOLOGIES

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ORMAT TECHNOLOGIES are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ORMAT TECHNOLOGIES is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Hon Hai Precision

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hon Hai Precision has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with ORMAT TECHNOLOGIES and Hon Hai

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

The idea behind ORMAT TECHNOLOGIES and Hon Hai Precision 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.