Correlation Between Infimer and Ormat Technologies

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

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

Diversification Opportunities for Infimer and Ormat Technologies

0.5

Correlation Coefficient

Infimer  Ormat Technologies

Very weak diversification

The 3 months correlation between Infimer and Ormat is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Infimer and Ormat Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ormat Technologies and Infimer 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 Infimer 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 Infimer i.e., Infimer and Ormat Technologies go up and down completely randomly.

Pair Corralation between Infimer and Ormat Technologies

Assuming the 90 days trading horizon Infimer is expected to generate 239.76 times more return on investment than Ormat Technologies. However, Infimer is 239.76 times more volatile than Ormat Technologies. It trades about 0.36 of its potential returns per unit of risk. Ormat Technologies is currently generating about -0.08 per unit of risk. If you would invest  4,700  in Infimer on September 18, 2024 and sell it today you would earn a total of  995,300  from holding Infimer or generate 21176.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.83%
Values	Daily Returns

Infimer  vs.  Ormat Technologies

Infimer

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Infimer are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Infimer sustained solid returns over the last few months and may actually be approaching a breakup point.

Ormat Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ormat Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Infimer and Ormat Technologies

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

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.