Correlation Between ORMAT TECHNOLOGIES and DAIRY FARM
Can any of the company-specific risk be diversified away by investing in both ORMAT TECHNOLOGIES and DAIRY FARM 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 DAIRY FARM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ORMAT TECHNOLOGIES and DAIRY FARM INTL, you can compare the effects of market volatilities on ORMAT TECHNOLOGIES and DAIRY FARM 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 DAIRY FARM. Check out your portfolio center. Please also check ongoing floating volatility patterns of ORMAT TECHNOLOGIES and DAIRY FARM.
Diversification Opportunities for ORMAT TECHNOLOGIES and DAIRY FARM
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ORMAT and DAIRY is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding ORMAT TECHNOLOGIES and DAIRY FARM INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIRY FARM INTL 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 DAIRY FARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIRY FARM INTL has no effect on the direction of ORMAT TECHNOLOGIES i.e., ORMAT TECHNOLOGIES and DAIRY FARM go up and down completely randomly.
Pair Corralation between ORMAT TECHNOLOGIES and DAIRY FARM
Assuming the 90 days trading horizon ORMAT TECHNOLOGIES is expected to under-perform the DAIRY FARM. But the stock apears to be less risky and, when comparing its historical volatility, ORMAT TECHNOLOGIES is 1.12 times less risky than DAIRY FARM. The stock trades about -0.25 of its potential returns per unit of risk. The DAIRY FARM INTL is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest 230.00 in DAIRY FARM INTL on September 20, 2024 and sell it today you would lose (14.00) from holding DAIRY FARM INTL or give up 6.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ORMAT TECHNOLOGIES vs. DAIRY FARM INTL
Performance |
| Timeline |
| ORMAT TECHNOLOGIES |
| DAIRY FARM INTL |
ORMAT TECHNOLOGIES and DAIRY FARM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ORMAT TECHNOLOGIES and DAIRY FARM
The main advantage of trading using opposite ORMAT TECHNOLOGIES and DAIRY FARM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ORMAT TECHNOLOGIES position performs unexpectedly, DAIRY FARM 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 DAIRY FARM will offset losses from the drop in DAIRY FARM's long position.| ORMAT TECHNOLOGIES vs. Apple Inc | ORMAT TECHNOLOGIES vs. Apple Inc | ORMAT TECHNOLOGIES vs. Apple Inc | ORMAT TECHNOLOGIES vs. Microsoft |
| DAIRY FARM vs. Axcelis Technologies | DAIRY FARM vs. FARO Technologies | DAIRY FARM vs. ORMAT TECHNOLOGIES | DAIRY FARM vs. GLG LIFE TECH |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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