Correlation Between Lion Biotechnologies and ORMAT TECHNOLOGIES
Can any of the company-specific risk be diversified away by investing in both Lion Biotechnologies 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 Lion Biotechnologies and ORMAT TECHNOLOGIES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lion Biotechnologies and ORMAT TECHNOLOGIES, you can compare the effects of market volatilities on Lion Biotechnologies 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 Lion Biotechnologies with a short position of ORMAT TECHNOLOGIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Biotechnologies and ORMAT TECHNOLOGIES.
Diversification Opportunities for Lion Biotechnologies and ORMAT TECHNOLOGIES
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lion and ORMAT is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Lion Biotechnologies and ORMAT TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORMAT TECHNOLOGIES and Lion Biotechnologies 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 Lion Biotechnologies 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 Lion Biotechnologies i.e., Lion Biotechnologies and ORMAT TECHNOLOGIES go up and down completely randomly.
Pair Corralation between Lion Biotechnologies and ORMAT TECHNOLOGIES
Assuming the 90 days trading horizon Lion Biotechnologies is expected to under-perform the ORMAT TECHNOLOGIES. In addition to that, Lion Biotechnologies is 1.92 times more volatile than ORMAT TECHNOLOGIES. It trades about -0.21 of its total potential returns per unit of risk. ORMAT TECHNOLOGIES is currently generating about -0.39 per unit of volatility. If you would invest 7,610 in ORMAT TECHNOLOGIES on September 23, 2024 and sell it today you would lose (1,084) from holding ORMAT TECHNOLOGIES or give up 14.24% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Lion Biotechnologies vs. ORMAT TECHNOLOGIES
Performance |
Timeline |
Lion Biotechnologies |
ORMAT TECHNOLOGIES |
Lion Biotechnologies and ORMAT TECHNOLOGIES Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lion Biotechnologies and ORMAT TECHNOLOGIES
The main advantage of trading using opposite Lion Biotechnologies and ORMAT TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion Biotechnologies 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.Lion Biotechnologies vs. National Retail Properties | Lion Biotechnologies vs. SHIP HEALTHCARE HLDGINC | Lion Biotechnologies vs. BJs Wholesale Club | Lion Biotechnologies vs. Natural Health Trends |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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