Correlation Between Tokyo Electric and Ormat Technologies
Can any of the company-specific risk be diversified away by investing in both Tokyo Electric 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 Tokyo Electric and Ormat Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tokyo Electric Power and Ormat Technologies, you can compare the effects of market volatilities on Tokyo Electric 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 Tokyo Electric with a short position of Ormat Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tokyo Electric and Ormat Technologies.
Diversification Opportunities for Tokyo Electric and Ormat Technologies
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tokyo and Ormat is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Tokyo Electric Power and Ormat Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ormat Technologies and Tokyo Electric 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 Tokyo Electric Power 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 Tokyo Electric i.e., Tokyo Electric and Ormat Technologies go up and down completely randomly.
Pair Corralation between Tokyo Electric and Ormat Technologies
Assuming the 90 days horizon Tokyo Electric Power is expected to generate 3.27 times more return on investment than Ormat Technologies. However, Tokyo Electric is 3.27 times more volatile than Ormat Technologies. It trades about -0.01 of its potential returns per unit of risk. Ormat Technologies is currently generating about -0.21 per unit of risk. If you would invest 275.00 in Tokyo Electric Power on October 25, 2024 and sell it today you would lose (10.00) from holding Tokyo Electric Power or give up 3.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 94.74% |
| Values | Daily Returns |
Tokyo Electric Power vs. Ormat Technologies
Performance |
| Timeline |
| Tokyo Electric Power |
| Ormat Technologies |
Tokyo Electric and Ormat Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tokyo Electric and Ormat Technologies
The main advantage of trading using opposite Tokyo Electric and Ormat Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tokyo Electric 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.| Tokyo Electric vs. Alternus Energy Group | Tokyo Electric vs. First National Energy | Tokyo Electric vs. Brookfield Renewable Partners |
| Ormat Technologies vs. Altus Power | Ormat Technologies vs. Enlight Renewable Energy | Ormat Technologies vs. Fluence Energy | Ormat Technologies vs. Clearway Energy |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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