Correlation Between Adobe and Okta
Can any of the company-specific risk be diversified away by investing in both Adobe and Okta 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 Adobe and Okta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adobe Inc and Okta Inc, you can compare the effects of market volatilities on Adobe and Okta 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 Adobe with a short position of Okta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adobe and Okta.
Diversification Opportunities for Adobe and Okta
Poor diversification
The 3 months correlation between Adobe and Okta is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Adobe Inc and Okta Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Okta Inc and Adobe 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 Adobe Inc are associated (or correlated) with Okta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Okta Inc has no effect on the direction of Adobe i.e., Adobe and Okta go up and down completely randomly.
Pair Corralation between Adobe and Okta
Assuming the 90 days trading horizon Adobe Inc is expected to generate 0.78 times more return on investment than Okta. However, Adobe Inc is 1.29 times less risky than Okta. It trades about 0.07 of its potential returns per unit of risk. Okta Inc is currently generating about 0.04 per unit of risk. If you would invest 3,471 in Adobe Inc on September 12, 2024 and sell it today you would earn a total of 3,030 from holding Adobe Inc or generate 87.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Adobe Inc vs. Okta Inc
Performance |
| Timeline |
| Adobe Inc |
| Okta Inc |
Adobe and Okta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adobe and Okta
The main advantage of trading using opposite Adobe and Okta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adobe position performs unexpectedly, Okta 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 Okta will offset losses from the drop in Okta's long position.| Adobe vs. Lupatech SA | Adobe vs. Dell Technologies | Adobe vs. Take Two Interactive Software | Adobe vs. Align Technology |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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