Correlation Between Ormat Technologies and FIBI Holdings

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Can any of the company-specific risk be diversified away by investing in both Ormat Technologies and FIBI Holdings 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 Ormat Technologies and FIBI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ormat Technologies and FIBI Holdings, you can compare the effects of market volatilities on Ormat Technologies and FIBI Holdings 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 Ormat Technologies with a short position of FIBI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ormat Technologies and FIBI Holdings.

Diversification Opportunities for Ormat Technologies and FIBI Holdings

0.35
  Correlation Coefficient

Weak diversification

The 3 months correlation between Ormat and FIBI is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ormat Technologies and FIBI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIBI Holdings and Ormat Technologies 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 Ormat Technologies are associated (or correlated) with FIBI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIBI Holdings has no effect on the direction of Ormat Technologies i.e., Ormat Technologies and FIBI Holdings go up and down completely randomly.

Pair Corralation between Ormat Technologies and FIBI Holdings

Assuming the 90 days trading horizon Ormat Technologies is expected to generate 1.46 times more return on investment than FIBI Holdings. However, Ormat Technologies is 1.46 times more volatile than FIBI Holdings. It trades about 0.15 of its potential returns per unit of risk. FIBI Holdings is currently generating about 0.07 per unit of risk. If you would invest  2,315,812  in Ormat Technologies on December 29, 2023 and sell it today you would earn a total of  116,188  from holding Ormat Technologies or generate 5.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Ormat Technologies  vs.  FIBI Holdings

 Performance 
       Timeline  
Ormat Technologies 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Ormat Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
FIBI Holdings 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in FIBI Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical indicators, FIBI Holdings is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Ormat Technologies and FIBI Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ormat Technologies and FIBI Holdings

The main advantage of trading using opposite Ormat Technologies and FIBI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ormat Technologies position performs unexpectedly, FIBI Holdings 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 FIBI Holdings will offset losses from the drop in FIBI Holdings' long position.
The idea behind Ormat Technologies and FIBI Holdings 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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