Correlation Between Verde Clean and Ormat Technologies

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

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

Diversification Opportunities for Verde Clean and Ormat Technologies

0.19

Correlation Coefficient

Verde Clean  Ormat Technologies

Average diversification

The 3 months correlation between Verde and Ormat is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Verde Clean Fuels and Ormat Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ormat Technologies and Verde Clean 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 Verde Clean Fuels 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 Verde Clean i.e., Verde Clean and Ormat Technologies go up and down completely randomly.

Pair Corralation between Verde Clean and Ormat Technologies

Assuming the 90 days horizon Verde Clean Fuels is expected to generate 6.43 times more return on investment than Ormat Technologies. However, Verde Clean is 6.43 times more volatile than Ormat Technologies. It trades about 0.04 of its potential returns per unit of risk. Ormat Technologies is currently generating about 0.04 per unit of risk. If you would invest  29.00  in Verde Clean Fuels on December 27, 2024 and sell it today you would lose (1.00) from holding Verde Clean Fuels or give up 3.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.16%
Values	Daily Returns

Verde Clean Fuels  vs.  Ormat Technologies

Verde Clean Fuels

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Verde Clean Fuels are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Verde Clean showed solid returns over the last few months and may actually be approaching a breakup point.

Ormat Technologies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ormat Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ormat Technologies is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Verde Clean and Ormat Technologies

The main advantage of trading using opposite Verde Clean and Ormat Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verde Clean 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 Verde Clean Fuels 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.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.