Correlation Between ORMAT TECHNOLOGIES and Melco Resorts
Can any of the company-specific risk be diversified away by investing in both ORMAT TECHNOLOGIES and Melco Resorts 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 Melco Resorts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ORMAT TECHNOLOGIES and Melco Resorts Entertainment, you can compare the effects of market volatilities on ORMAT TECHNOLOGIES and Melco Resorts 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 Melco Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of ORMAT TECHNOLOGIES and Melco Resorts.
Diversification Opportunities for ORMAT TECHNOLOGIES and Melco Resorts
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ORMAT and Melco is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding ORMAT TECHNOLOGIES and Melco Resorts Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melco Resorts Entert 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 Melco Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melco Resorts Entert has no effect on the direction of ORMAT TECHNOLOGIES i.e., ORMAT TECHNOLOGIES and Melco Resorts go up and down completely randomly.
Pair Corralation between ORMAT TECHNOLOGIES and Melco Resorts
Assuming the 90 days trading horizon ORMAT TECHNOLOGIES is expected to generate 2.73 times less return on investment than Melco Resorts. But when comparing it to its historical volatility, ORMAT TECHNOLOGIES is 1.63 times less risky than Melco Resorts. It trades about 0.19 of its potential returns per unit of risk. Melco Resorts Entertainment is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 448.00 in Melco Resorts Entertainment on April 25, 2025 and sell it today you would earn a total of 302.00 from holding Melco Resorts Entertainment or generate 67.41% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
ORMAT TECHNOLOGIES vs. Melco Resorts Entertainment
Performance |
Timeline |
ORMAT TECHNOLOGIES |
Melco Resorts Entert |
ORMAT TECHNOLOGIES and Melco Resorts Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ORMAT TECHNOLOGIES and Melco Resorts
The main advantage of trading using opposite ORMAT TECHNOLOGIES and Melco Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ORMAT TECHNOLOGIES position performs unexpectedly, Melco Resorts 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 Melco Resorts will offset losses from the drop in Melco Resorts' long position.ORMAT TECHNOLOGIES vs. Lion One Metals | ORMAT TECHNOLOGIES vs. ARDAGH METAL PACDL 0001 | ORMAT TECHNOLOGIES vs. Sun Art Retail | ORMAT TECHNOLOGIES vs. ANDRADA MINING LTD |
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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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