Correlation Between Natural Health and ORMAT TECHNOLOGIES

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

By analyzing existing cross correlation between Natural Health Trends and ORMAT TECHNOLOGIES, you can compare the effects of market volatilities on Natural Health 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 Natural Health with a short position of ORMAT TECHNOLOGIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natural Health and ORMAT TECHNOLOGIES.

Diversification Opportunities for Natural Health and ORMAT TECHNOLOGIES

-0.11

Correlation Coefficient

Natural Health  ORMAT TECHNOLOGIES

Good diversification

The 3 months correlation between Natural and ORMAT is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Natural Health Trends and ORMAT TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORMAT TECHNOLOGIES and Natural Health 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 Natural Health Trends 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 Natural Health i.e., Natural Health and ORMAT TECHNOLOGIES go up and down completely randomly.

Pair Corralation between Natural Health and ORMAT TECHNOLOGIES

Assuming the 90 days trading horizon Natural Health Trends is expected to generate 1.79 times more return on investment than ORMAT TECHNOLOGIES. However, Natural Health is 1.79 times more volatile than ORMAT TECHNOLOGIES. It trades about 0.08 of its potential returns per unit of risk. ORMAT TECHNOLOGIES is currently generating about 0.03 per unit of risk. If you would invest  423.00  in Natural Health Trends on December 2, 2024 and sell it today you would earn a total of  35.00  from holding Natural Health Trends or generate 8.27% return on investment over 90 days.

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

Natural Health Trends  vs.  ORMAT TECHNOLOGIES

Natural Health Trends

Risk-Adjusted Performance

Very Weak

Over the last 90 days Natural Health Trends has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Natural Health is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 fragile 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.

Pair Trading with Natural Health and ORMAT TECHNOLOGIES

The main advantage of trading using opposite Natural Health and ORMAT TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Health 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's long position.

The idea behind Natural Health Trends 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.