Correlation Between Ormat Technologies and Pluristem

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

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

Diversification Opportunities for Ormat Technologies and Pluristem

-0.36

Correlation Coefficient

Ormat Technologies  Pluristem

Very good diversification

The 3 months correlation between Ormat and Pluristem is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ormat Technologies and Pluristem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pluristem 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 Pluristem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pluristem has no effect on the direction of Ormat Technologies i.e., Ormat Technologies and Pluristem go up and down completely randomly.

Pair Corralation between Ormat Technologies and Pluristem

Assuming the 90 days trading horizon Ormat Technologies is expected to generate 0.27 times more return on investment than Pluristem. However, Ormat Technologies is 3.74 times less risky than Pluristem. It trades about 0.16 of its potential returns per unit of risk. Pluristem is currently generating about 0.03 per unit of risk. If you would invest  2,688,914  in Ormat Technologies on September 4, 2024 and sell it today you would earn a total of  264,086  from holding Ormat Technologies or generate 9.82% 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.  Pluristem

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.

Pluristem

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pluristem are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pluristem may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ormat Technologies and Pluristem

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

The idea behind Ormat Technologies and Pluristem 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.