Correlation Between Nice and Ormat Technologies

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

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

Diversification Opportunities for Nice and Ormat Technologies

0.5

Correlation Coefficient

Nice  Ormat Technologies

Very weak diversification

The 3 months correlation between Nice and Ormat is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Nice and Ormat Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ormat Technologies and Nice 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 Nice 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 Nice i.e., Nice and Ormat Technologies go up and down completely randomly.

Pair Corralation between Nice and Ormat Technologies

Assuming the 90 days trading horizon Nice is expected to generate 1.46 times less return on investment than Ormat Technologies. In addition to that, Nice is 2.33 times more volatile than Ormat Technologies. It trades about 0.05 of its total potential returns per unit of risk. Ormat Technologies is currently generating about 0.16 per unit of volatility. If you would invest  2,707,906  in Ormat Technologies on August 30, 2024 and sell it today you would earn a total of  264,094  from holding Ormat Technologies or generate 9.75% return on investment over 90 days.

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

Nice  vs.  Ormat Technologies

Nice

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nice are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nice may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Ormat Technologies

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ormat Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ormat Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nice and Ormat Technologies

The main advantage of trading using opposite Nice and Ormat Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nice 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' long position.

The idea behind Nice 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..