Correlation Between Okta and ARMOUR Residential
Can any of the company-specific risk be diversified away by investing in both Okta and ARMOUR Residential 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 ARMOUR Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and ARMOUR Residential REIT, you can compare the effects of market volatilities on Okta and ARMOUR Residential 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 ARMOUR Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and ARMOUR Residential.
Diversification Opportunities for Okta and ARMOUR Residential
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Okta and ARMOUR is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and ARMOUR Residential REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARMOUR Residential REIT 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 ARMOUR Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARMOUR Residential REIT has no effect on the direction of Okta i.e., Okta and ARMOUR Residential go up and down completely randomly.
Pair Corralation between Okta and ARMOUR Residential
Given the investment horizon of 90 days Okta Inc is expected to generate 2.18 times more return on investment than ARMOUR Residential. However, Okta is 2.18 times more volatile than ARMOUR Residential REIT. It trades about 0.13 of its potential returns per unit of risk. ARMOUR Residential REIT is currently generating about -0.14 per unit of risk. If you would invest 7,325 in Okta Inc on August 28, 2024 and sell it today you would earn a total of 325.00 from holding Okta Inc or generate 4.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Okta Inc vs. ARMOUR Residential REIT
Performance |
| Timeline |
| Okta Inc |
| ARMOUR Residential REIT |
Okta and ARMOUR Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and ARMOUR Residential
The main advantage of trading using opposite Okta and ARMOUR Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, ARMOUR Residential 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 ARMOUR Residential will offset losses from the drop in ARMOUR Residential's long position.The idea behind Okta Inc and ARMOUR Residential REIT 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.| ARMOUR Residential vs. Annaly Capital Management | ARMOUR Residential vs. Invesco Mortgage Capital | ARMOUR Residential vs. Invesco Mortgage Capital | ARMOUR Residential vs. Chimera 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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