Correlation Between Ormat Technologies and Golan Plastic

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

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

Diversification Opportunities for Ormat Technologies and Golan Plastic

-0.35

Correlation Coefficient

Ormat Technologies  Golan Plastic

Very good diversification

The 3 months correlation between Ormat and Golan is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ormat Technologies and Golan Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golan Plastic 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 Golan Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golan Plastic has no effect on the direction of Ormat Technologies i.e., Ormat Technologies and Golan Plastic go up and down completely randomly.

Pair Corralation between Ormat Technologies and Golan Plastic

Assuming the 90 days trading horizon Ormat Technologies is expected to generate 0.71 times more return on investment than Golan Plastic. However, Ormat Technologies is 1.42 times less risky than Golan Plastic. It trades about 0.06 of its potential returns per unit of risk. Golan Plastic is currently generating about -0.19 per unit of risk. If you would invest  2,461,883  in Ormat Technologies on December 30, 2024 and sell it today you would earn a total of  118,117  from holding Ormat Technologies or generate 4.8% 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.  Golan Plastic

Ormat Technologies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ormat Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ormat Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Golan Plastic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Golan Plastic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ormat Technologies and Golan Plastic

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

The idea behind Ormat Technologies and Golan Plastic 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.