Correlation Between ORMAT TECHNOLOGIES and Chevron
Can any of the company-specific risk be diversified away by investing in both ORMAT TECHNOLOGIES and Chevron 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 Chevron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ORMAT TECHNOLOGIES and Chevron, you can compare the effects of market volatilities on ORMAT TECHNOLOGIES and Chevron 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 Chevron. Check out your portfolio center. Please also check ongoing floating volatility patterns of ORMAT TECHNOLOGIES and Chevron.
Diversification Opportunities for ORMAT TECHNOLOGIES and Chevron
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ORMAT and Chevron is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding ORMAT TECHNOLOGIES and Chevron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron 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 Chevron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron has no effect on the direction of ORMAT TECHNOLOGIES i.e., ORMAT TECHNOLOGIES and Chevron go up and down completely randomly.
Pair Corralation between ORMAT TECHNOLOGIES and Chevron
Assuming the 90 days trading horizon ORMAT TECHNOLOGIES is expected to generate 1.51 times less return on investment than Chevron. In addition to that, ORMAT TECHNOLOGIES is 1.02 times more volatile than Chevron. It trades about 0.14 of its total potential returns per unit of risk. Chevron is currently generating about 0.21 per unit of volatility. If you would invest 12,466 in Chevron on September 12, 2024 and sell it today you would earn a total of 2,434 from holding Chevron or generate 19.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.46% |
| Values | Daily Returns |
ORMAT TECHNOLOGIES vs. Chevron
Performance |
| Timeline |
| ORMAT TECHNOLOGIES |
| Chevron |
ORMAT TECHNOLOGIES and Chevron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ORMAT TECHNOLOGIES and Chevron
The main advantage of trading using opposite ORMAT TECHNOLOGIES and Chevron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ORMAT TECHNOLOGIES position performs unexpectedly, Chevron 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 Chevron will offset losses from the drop in Chevron's long position.| ORMAT TECHNOLOGIES vs. Apple Inc | ORMAT TECHNOLOGIES vs. Apple Inc | ORMAT TECHNOLOGIES vs. Apple Inc | ORMAT TECHNOLOGIES vs. Apple Inc |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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