Correlation Between ORMAT TECHNOLOGIES and ASPEN TECHINC

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

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

Diversification Opportunities for ORMAT TECHNOLOGIES and ASPEN TECHINC

0.06

Correlation Coefficient

ORMAT TECHNOLOGIES  ASPEN TECHINC

Significant diversification

The 3 months correlation between ORMAT and ASPEN is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding ORMAT TECHNOLOGIES and ASPEN TECHINC DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASPEN TECHINC DL 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 ASPEN TECHINC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASPEN TECHINC DL has no effect on the direction of ORMAT TECHNOLOGIES i.e., ORMAT TECHNOLOGIES and ASPEN TECHINC go up and down completely randomly.

Pair Corralation between ORMAT TECHNOLOGIES and ASPEN TECHINC

Assuming the 90 days trading horizon ORMAT TECHNOLOGIES is expected to under-perform the ASPEN TECHINC. In addition to that, ORMAT TECHNOLOGIES is 2.64 times more volatile than ASPEN TECHINC DL. It trades about -0.32 of its total potential returns per unit of risk. ASPEN TECHINC DL is currently generating about 0.2 per unit of volatility. If you would invest  23,400  in ASPEN TECHINC DL on October 10, 2024 and sell it today you would earn a total of  600.00  from holding ASPEN TECHINC DL or generate 2.56% 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.  ASPEN TECHINC DL

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 comparatively stable basic indicators, ORMAT TECHNOLOGIES is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

ASPEN TECHINC DL

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASPEN TECHINC DL are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ASPEN TECHINC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ORMAT TECHNOLOGIES and ASPEN TECHINC

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

The idea behind ORMAT TECHNOLOGIES and ASPEN TECHINC DL 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.