Correlation Between ORMAT TECHNOLOGIES and Idemitsu Kosan

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

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

Diversification Opportunities for ORMAT TECHNOLOGIES and Idemitsu Kosan

-0.12

Correlation Coefficient

ORMAT TECHNOLOGIES  Idemitsu Kosan

Good diversification

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

Pair Corralation between ORMAT TECHNOLOGIES and Idemitsu Kosan

Assuming the 90 days trading horizon ORMAT TECHNOLOGIES is expected to under-perform the Idemitsu Kosan. But the stock apears to be less risky and, when comparing its historical volatility, ORMAT TECHNOLOGIES is 1.32 times less risky than Idemitsu Kosan. The stock trades about -0.01 of its potential returns per unit of risk. The Idemitsu Kosan CoLtd is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  394.00  in Idemitsu Kosan CoLtd on December 4, 2024 and sell it today you would earn a total of  251.00  from holding Idemitsu Kosan CoLtd or generate 63.71% 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.  Idemitsu Kosan CoLtd

ORMAT TECHNOLOGIES

Risk-Adjusted Performance

Very Weak

Over the last 90 days ORMAT TECHNOLOGIES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Idemitsu Kosan CoLtd

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Idemitsu Kosan CoLtd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Idemitsu Kosan is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ORMAT TECHNOLOGIES and Idemitsu Kosan

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

The idea behind ORMAT TECHNOLOGIES and Idemitsu Kosan CoLtd 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.