Correlation Between ORMAT TECHNOLOGIES and TC Energy

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

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

Diversification Opportunities for ORMAT TECHNOLOGIES and TC Energy

0.08

Correlation Coefficient

ORMAT TECHNOLOGIES  TC Energy

Significant diversification

The 3 months correlation between ORMAT and TRS is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding ORMAT TECHNOLOGIES and TC Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy 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 TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy has no effect on the direction of ORMAT TECHNOLOGIES i.e., ORMAT TECHNOLOGIES and TC Energy go up and down completely randomly.

Pair Corralation between ORMAT TECHNOLOGIES and TC Energy

Assuming the 90 days trading horizon ORMAT TECHNOLOGIES is expected to under-perform the TC Energy. But the stock apears to be less risky and, when comparing its historical volatility, ORMAT TECHNOLOGIES is 1.08 times less risky than TC Energy. The stock trades about -0.05 of its potential returns per unit of risk. The TC Energy is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,298  in TC Energy on October 23, 2024 and sell it today you would earn a total of  168.00  from holding TC Energy or generate 3.91% return on investment over 90 days.

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

ORMAT TECHNOLOGIES  vs.  TC Energy

ORMAT TECHNOLOGIES

Risk-Adjusted Performance

0 of 100

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

TC Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, TC Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ORMAT TECHNOLOGIES and TC Energy

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

The idea behind ORMAT TECHNOLOGIES and TC Energy 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 Anywhere module to track or share privately all of your investments from the convenience of any device.