Correlation Between JAPAN TOBACCO and ORMAT TECHNOLOGIES
Can any of the company-specific risk be diversified away by investing in both JAPAN TOBACCO 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 JAPAN TOBACCO and ORMAT TECHNOLOGIES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JAPAN TOBACCO UNSPADR12 and ORMAT TECHNOLOGIES, you can compare the effects of market volatilities on JAPAN TOBACCO 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 JAPAN TOBACCO with a short position of ORMAT TECHNOLOGIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN TOBACCO and ORMAT TECHNOLOGIES.
Diversification Opportunities for JAPAN TOBACCO and ORMAT TECHNOLOGIES
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between JAPAN and ORMAT is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and ORMAT TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORMAT TECHNOLOGIES and JAPAN TOBACCO 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 JAPAN TOBACCO UNSPADR12 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 JAPAN TOBACCO i.e., JAPAN TOBACCO and ORMAT TECHNOLOGIES go up and down completely randomly.
Pair Corralation between JAPAN TOBACCO and ORMAT TECHNOLOGIES
Assuming the 90 days trading horizon JAPAN TOBACCO is expected to generate 1.25 times less return on investment than ORMAT TECHNOLOGIES. In addition to that, JAPAN TOBACCO is 1.1 times more volatile than ORMAT TECHNOLOGIES. It trades about 0.07 of its total potential returns per unit of risk. ORMAT TECHNOLOGIES is currently generating about 0.1 per unit of volatility. If you would invest 7,476 in ORMAT TECHNOLOGIES on August 31, 2024 and sell it today you would earn a total of 236.00 from holding ORMAT TECHNOLOGIES or generate 3.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
JAPAN TOBACCO UNSPADR12 vs. ORMAT TECHNOLOGIES
Performance |
| Timeline |
| JAPAN TOBACCO UNSPADR12 |
| ORMAT TECHNOLOGIES |
JAPAN TOBACCO and ORMAT TECHNOLOGIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN TOBACCO and ORMAT TECHNOLOGIES
The main advantage of trading using opposite JAPAN TOBACCO and ORMAT TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN TOBACCO 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.| JAPAN TOBACCO vs. Titan Machinery | JAPAN TOBACCO vs. Federal Agricultural Mortgage | JAPAN TOBACCO vs. HYDROFARM HLD GRP | JAPAN TOBACCO vs. Autohome ADR |
| ORMAT TECHNOLOGIES vs. SIVERS SEMICONDUCTORS AB | ORMAT TECHNOLOGIES vs. Darden Restaurants | ORMAT TECHNOLOGIES vs. Reliance Steel Aluminum | ORMAT TECHNOLOGIES vs. Q2M Managementberatung AG |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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