Correlation Between Kering SA and ORMAT TECHNOLOGIES

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

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

Diversification Opportunities for Kering SA and ORMAT TECHNOLOGIES

-0.56

Correlation Coefficient

Kering SA  ORMAT TECHNOLOGIES

Excellent diversification

The 3 months correlation between Kering and ORMAT is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Kering SA and ORMAT TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORMAT TECHNOLOGIES and Kering SA 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 Kering SA 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 Kering SA i.e., Kering SA and ORMAT TECHNOLOGIES go up and down completely randomly.

Pair Corralation between Kering SA and ORMAT TECHNOLOGIES

Assuming the 90 days trading horizon Kering SA is expected to generate 1.47 times more return on investment than ORMAT TECHNOLOGIES. However, Kering SA is 1.47 times more volatile than ORMAT TECHNOLOGIES. It trades about -0.01 of its potential returns per unit of risk. ORMAT TECHNOLOGIES is currently generating about -0.02 per unit of risk. If you would invest  23,940  in Kering SA on October 10, 2024 and sell it today you would lose (695.00) from holding Kering SA or give up 2.9% of portfolio value over 90 days.

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

Kering SA  vs.  ORMAT TECHNOLOGIES

Kering SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

ORMAT TECHNOLOGIES

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, ORMAT TECHNOLOGIES is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Kering SA and ORMAT TECHNOLOGIES

The main advantage of trading using opposite Kering SA and ORMAT TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kering SA 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 Kering SA 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.