Correlation Between Okta and Abbott Laboratories
Can any of the company-specific risk be diversified away by investing in both Okta and Abbott Laboratories 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 Okta and Abbott Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Abbott Laboratories, you can compare the effects of market volatilities on Okta and Abbott Laboratories 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 Okta with a short position of Abbott Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Abbott Laboratories.
Diversification Opportunities for Okta and Abbott Laboratories
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Okta and Abbott is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories and Okta 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 Okta Inc are associated (or correlated) with Abbott Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abbott Laboratories has no effect on the direction of Okta i.e., Okta and Abbott Laboratories go up and down completely randomly.
Pair Corralation between Okta and Abbott Laboratories
Given the investment horizon of 90 days Okta Inc is expected to generate 1.11 times more return on investment than Abbott Laboratories. However, Okta is 1.11 times more volatile than Abbott Laboratories. It trades about 0.22 of its potential returns per unit of risk. Abbott Laboratories is currently generating about 0.24 per unit of risk. If you would invest 7,189 in Okta Inc on September 1, 2024 and sell it today you would earn a total of 567.00 from holding Okta Inc or generate 7.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Okta Inc vs. Abbott Laboratories
Performance |
| Timeline |
| Okta Inc |
| Abbott Laboratories |
Okta and Abbott Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Abbott Laboratories
The main advantage of trading using opposite Okta and Abbott Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Abbott Laboratories 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 Abbott Laboratories will offset losses from the drop in Abbott Laboratories' long position.The idea behind Okta Inc and Abbott Laboratories 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.| Abbott Laboratories vs. Singapore Telecommunications Limited | Abbott Laboratories vs. MTI WIRELESS EDGE | Abbott Laboratories vs. Spirent Communications plc | Abbott Laboratories vs. JJ SNACK FOODS |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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