Correlation Between Ocean Thermal and Ormat Technologies

Can any of the company-specific risk be diversified away by investing in both Ocean Thermal 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 Ocean Thermal and Ormat Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ocean Thermal Energy and Ormat Technologies, you can compare the effects of market volatilities on Ocean Thermal 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 Ocean Thermal with a short position of Ormat Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ocean Thermal and Ormat Technologies.

Diversification Opportunities for Ocean Thermal and Ormat Technologies

0.18

Correlation Coefficient

Ocean Thermal  Ormat Technologies

Average diversification

The 3 months correlation between Ocean and Ormat is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ocean Thermal Energy and Ormat Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ormat Technologies and Ocean Thermal 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 Ocean Thermal Energy 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 Ocean Thermal i.e., Ocean Thermal and Ormat Technologies go up and down completely randomly.

Pair Corralation between Ocean Thermal and Ormat Technologies

If you would invest  7,261  in Ormat Technologies on September 3, 2024 and sell it today you would earn a total of  901.00  from holding Ormat Technologies or generate 12.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Ocean Thermal Energy  vs.  Ormat Technologies

Ocean Thermal Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ocean Thermal Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Ocean Thermal is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Ormat Technologies

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ormat Technologies are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Ormat Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ocean Thermal and Ormat Technologies

The main advantage of trading using opposite Ocean Thermal and Ormat Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ocean Thermal 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 Ocean Thermal Energy 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.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.