Correlation Between Ford and ORMAT TECHNOLOGIES
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and ORMAT TECHNOLOGIES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and ORMAT TECHNOLOGIES, you can compare the effects of market volatilities on Ford 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 Ford with a short position of ORMAT TECHNOLOGIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and ORMAT TECHNOLOGIES.
Diversification Opportunities for Ford and ORMAT TECHNOLOGIES
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and ORMAT is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and ORMAT TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORMAT TECHNOLOGIES and Ford 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 Ford Motor 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 Ford i.e., Ford and ORMAT TECHNOLOGIES go up and down completely randomly.
Pair Corralation between Ford and ORMAT TECHNOLOGIES
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.27 times more return on investment than ORMAT TECHNOLOGIES. However, Ford is 1.27 times more volatile than ORMAT TECHNOLOGIES. It trades about 0.0 of its potential returns per unit of risk. ORMAT TECHNOLOGIES is currently generating about -0.01 per unit of risk. If you would invest 1,072 in Ford Motor on October 7, 2024 and sell it today you would lose (84.00) from holding Ford Motor or give up 7.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.8% |
| Values | Daily Returns |
Ford Motor vs. ORMAT TECHNOLOGIES
Performance |
| Timeline |
| Ford Motor |
| ORMAT TECHNOLOGIES |
Ford and ORMAT TECHNOLOGIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and ORMAT TECHNOLOGIES
The main advantage of trading using opposite Ford and ORMAT TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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.| ORMAT TECHNOLOGIES vs. The Yokohama Rubber | ORMAT TECHNOLOGIES vs. Broadwind | ORMAT TECHNOLOGIES vs. Plastic Omnium | ORMAT TECHNOLOGIES vs. TEXAS ROADHOUSE |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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