Correlation Between Prime Energy and Ormat Technologies
Can any of the company-specific risk be diversified away by investing in both Prime Energy 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 Prime Energy and Ormat Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prime Energy PE and Ormat Technologies, you can compare the effects of market volatilities on Prime Energy 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 Prime Energy with a short position of Ormat Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Energy and Ormat Technologies.
Diversification Opportunities for Prime Energy and Ormat Technologies
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prime and Ormat is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Prime Energy PE and Ormat Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ormat Technologies and Prime Energy 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 Prime Energy PE 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 Prime Energy i.e., Prime Energy and Ormat Technologies go up and down completely randomly.
Pair Corralation between Prime Energy and Ormat Technologies
Assuming the 90 days trading horizon Prime Energy PE is expected to under-perform the Ormat Technologies. In addition to that, Prime Energy is 2.38 times more volatile than Ormat Technologies. It trades about -0.08 of its total potential returns per unit of risk. Ormat Technologies is currently generating about -0.07 per unit of volatility. If you would invest 2,998,788 in Ormat Technologies on September 4, 2024 and sell it today you would lose (45,788) from holding Ormat Technologies or give up 1.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prime Energy PE vs. Ormat Technologies
Performance |
| Timeline |
| Prime Energy PE |
| Ormat Technologies |
Prime Energy and Ormat Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prime Energy and Ormat Technologies
The main advantage of trading using opposite Prime Energy and Ormat Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prime Energy 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.| Prime Energy vs. Energix Renewable Energies | Prime Energy vs. Doral Group Renewable | Prime Energy vs. Brainsway | Prime Energy vs. Mivne Real Estate |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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