Correlation Between Ormat Technologies and Orbit Technologies

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

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

Diversification Opportunities for Ormat Technologies and Orbit Technologies

0.75

Correlation Coefficient

Ormat Technologies  Orbit Technologies

Poor diversification

The 3 months correlation between Ormat and Orbit is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ormat Technologies and Orbit Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orbit Technologies 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 Orbit Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orbit Technologies has no effect on the direction of Ormat Technologies i.e., Ormat Technologies and Orbit Technologies go up and down completely randomly.

Pair Corralation between Ormat Technologies and Orbit Technologies

Assuming the 90 days trading horizon Ormat Technologies is expected to generate 1.86 times less return on investment than Orbit Technologies. But when comparing it to its historical volatility, Ormat Technologies is 1.35 times less risky than Orbit Technologies. It trades about 0.15 of its potential returns per unit of risk. Orbit Technologies is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  234,400  in Orbit Technologies on September 2, 2024 and sell it today you would earn a total of  40,600  from holding Orbit Technologies or generate 17.32% return on investment over 90 days.

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

Ormat Technologies  vs.  Orbit Technologies

Ormat Technologies

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ormat Technologies are ranked lower than 11 (%) 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 January 2025.

Orbit Technologies

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orbit Technologies are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Orbit Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ormat Technologies and Orbit Technologies

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

The idea behind Ormat Technologies and Orbit 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.