Correlation Between Okta and Les Hotels
Can any of the company-specific risk be diversified away by investing in both Okta and Les Hotels 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 Les Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Les Hotels Bav, you can compare the effects of market volatilities on Okta and Les Hotels 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 Les Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Les Hotels.
Diversification Opportunities for Okta and Les Hotels
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Okta and Les is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Les Hotels Bav in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Les Hotels Bav 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 Les Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Les Hotels Bav has no effect on the direction of Okta i.e., Okta and Les Hotels go up and down completely randomly.
Pair Corralation between Okta and Les Hotels
Given the investment horizon of 90 days Okta Inc is expected to under-perform the Les Hotels. In addition to that, Okta is 1.43 times more volatile than Les Hotels Bav. It trades about -0.04 of its total potential returns per unit of risk. Les Hotels Bav is currently generating about 0.02 per unit of volatility. If you would invest 7,070 in Les Hotels Bav on August 29, 2024 and sell it today you would earn a total of 130.00 from holding Les Hotels Bav or generate 1.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Okta Inc vs. Les Hotels Bav
Performance |
| Timeline |
| Okta Inc |
| Les Hotels Bav |
Okta and Les Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Les Hotels
The main advantage of trading using opposite Okta and Les Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Les Hotels 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 Les Hotels will offset losses from the drop in Les Hotels' long position.The idea behind Okta Inc and Les Hotels Bav 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.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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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