Correlation Between Nova and Ormat Technologies
Can any of the company-specific risk be diversified away by investing in both Nova 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 Nova and Ormat Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nova and Ormat Technologies, you can compare the effects of market volatilities on Nova 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 Nova with a short position of Ormat Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova and Ormat Technologies.
Diversification Opportunities for Nova and Ormat Technologies
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nova and Ormat is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Nova and Ormat Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ormat Technologies and Nova 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 Nova 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 Nova i.e., Nova and Ormat Technologies go up and down completely randomly.
Pair Corralation between Nova and Ormat Technologies
Assuming the 90 days trading horizon Nova is expected to under-perform the Ormat Technologies. In addition to that, Nova is 2.71 times more volatile than Ormat Technologies. It trades about -0.14 of its total potential returns per unit of risk. Ormat Technologies is currently generating about -0.11 per unit of volatility. If you would invest 3,043,770 in Ormat Technologies on August 28, 2024 and sell it today you would lose (79,770) from holding Ormat Technologies or give up 2.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nova vs. Ormat Technologies
Performance |
| Timeline |
| Nova |
| Ormat Technologies |
Nova and Ormat Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nova and Ormat Technologies
The main advantage of trading using opposite Nova and Ormat Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nova 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 Nova 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. Elbit Systems | Ormat Technologies vs. Nice | Ormat Technologies vs. Tower Semiconductor | Ormat Technologies vs. Nova |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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