Correlation Between Basic Materials and Okta
Can any of the company-specific risk be diversified away by investing in both Basic Materials 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 Basic Materials and Okta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Okta Inc, you can compare the effects of market volatilities on Basic Materials 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 Basic Materials with a short position of Okta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Okta.
Diversification Opportunities for Basic Materials and Okta
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Basic and Okta is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Okta Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Okta Inc and Basic Materials 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 Basic Materials 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 Basic Materials i.e., Basic Materials and Okta go up and down completely randomly.
Pair Corralation between Basic Materials and Okta
Assuming the 90 days trading horizon Basic Materials is expected to generate 6.32 times less return on investment than Okta. But when comparing it to its historical volatility, Basic Materials is 3.04 times less risky than Okta. It trades about 0.1 of its potential returns per unit of risk. Okta Inc is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,060 in Okta Inc on September 1, 2024 and sell it today you would earn a total of 280.00 from holding Okta Inc or generate 13.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Basic Materials vs. Okta Inc
Performance |
| Timeline |
Basic Materials and Okta Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
Okta Inc
Pair trading matchups for Okta
Pair Trading with Basic Materials and Okta
The main advantage of trading using opposite Basic Materials and Okta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials 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.| Basic Materials vs. GP Investments | Basic Materials vs. TAL Education Group | Basic Materials vs. Deutsche Bank Aktiengesellschaft | Basic Materials vs. STMicroelectronics NV |
| Okta vs. Cognizant Technology Solutions | Okta vs. MAHLE Metal Leve | Okta vs. Costco Wholesale | Okta vs. Ross Stores |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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