Correlation Between Pembina Pipeline and ORMAT TECHNOLOGIES

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

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

Diversification Opportunities for Pembina Pipeline and ORMAT TECHNOLOGIES

0.71

Correlation Coefficient

Pembina Pipeline  ORMAT TECHNOLOGIES

Poor diversification

The 3 months correlation between Pembina and ORMAT is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp and ORMAT TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORMAT TECHNOLOGIES and Pembina Pipeline 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 Pembina Pipeline Corp 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 Pembina Pipeline i.e., Pembina Pipeline and ORMAT TECHNOLOGIES go up and down completely randomly.

Pair Corralation between Pembina Pipeline and ORMAT TECHNOLOGIES

Assuming the 90 days horizon Pembina Pipeline Corp is expected to generate 1.1 times more return on investment than ORMAT TECHNOLOGIES. However, Pembina Pipeline is 1.1 times more volatile than ORMAT TECHNOLOGIES. It trades about -0.09 of its potential returns per unit of risk. ORMAT TECHNOLOGIES is currently generating about -0.16 per unit of risk. If you would invest  3,820  in Pembina Pipeline Corp on September 12, 2024 and sell it today you would lose (120.00) from holding Pembina Pipeline Corp or give up 3.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Pembina Pipeline Corp  vs.  ORMAT TECHNOLOGIES

Pembina Pipeline Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Pembina Pipeline is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ORMAT TECHNOLOGIES

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ORMAT TECHNOLOGIES are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively 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 Pembina Pipeline and ORMAT TECHNOLOGIES

The main advantage of trading using opposite Pembina Pipeline and ORMAT TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pembina Pipeline 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's long position.

The idea behind Pembina Pipeline Corp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.