Correlation Between Okta and Australian Dairy
Can any of the company-specific risk be diversified away by investing in both Okta and Australian Dairy 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 Australian Dairy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Australian Dairy Farms, you can compare the effects of market volatilities on Okta and Australian Dairy 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 Australian Dairy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Australian Dairy.
Diversification Opportunities for Okta and Australian Dairy
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Okta and Australian is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Australian Dairy Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Dairy Farms 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 Australian Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Dairy Farms has no effect on the direction of Okta i.e., Okta and Australian Dairy go up and down completely randomly.
Pair Corralation between Okta and Australian Dairy
Given the investment horizon of 90 days Okta is expected to generate 8.17 times less return on investment than Australian Dairy. But when comparing it to its historical volatility, Okta Inc is 2.89 times less risky than Australian Dairy. It trades about 0.15 of its potential returns per unit of risk. Australian Dairy Farms is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 2.00 in Australian Dairy Farms on August 31, 2024 and sell it today you would earn a total of 1.10 from holding Australian Dairy Farms or generate 55.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Okta Inc vs. Australian Dairy Farms
Performance |
| Timeline |
| Okta Inc |
| Australian Dairy Farms |
Okta and Australian Dairy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Australian Dairy
The main advantage of trading using opposite Okta and Australian Dairy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Australian Dairy 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 Australian Dairy will offset losses from the drop in Australian Dairy's long position.The idea behind Okta Inc and Australian Dairy Farms 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.| Australian Dairy vs. Hutchison Telecommunications | Australian Dairy vs. Infomedia | Australian Dairy vs. Black Rock Mining | Australian Dairy vs. Skycity Entertainment Group |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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