Correlation Between Okta and Bausch Lomb
Can any of the company-specific risk be diversified away by investing in both Okta and Bausch Lomb 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 Bausch Lomb into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Bausch Lomb Corp, you can compare the effects of market volatilities on Okta and Bausch Lomb 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 Bausch Lomb. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Bausch Lomb.
Diversification Opportunities for Okta and Bausch Lomb
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Okta and Bausch is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Bausch Lomb Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bausch Lomb Corp 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 Bausch Lomb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bausch Lomb Corp has no effect on the direction of Okta i.e., Okta and Bausch Lomb go up and down completely randomly.
Pair Corralation between Okta and Bausch Lomb
Given the investment horizon of 90 days Okta Inc is expected to under-perform the Bausch Lomb. But the stock apears to be less risky and, when comparing its historical volatility, Okta Inc is 1.01 times less risky than Bausch Lomb. The stock trades about -0.04 of its potential returns per unit of risk. The Bausch Lomb Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,539 in Bausch Lomb Corp on August 28, 2024 and sell it today you would earn a total of 428.00 from holding Bausch Lomb Corp or generate 27.81% 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. Bausch Lomb Corp
Performance |
| Timeline |
| Okta Inc |
| Bausch Lomb Corp |
Okta and Bausch Lomb Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Bausch Lomb
The main advantage of trading using opposite Okta and Bausch Lomb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Bausch Lomb 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 Bausch Lomb will offset losses from the drop in Bausch Lomb's long position.The idea behind Okta Inc and Bausch Lomb Corp 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.| Bausch Lomb vs. The Cooper Companies, | Bausch Lomb vs. ICU Medical | Bausch Lomb vs. Hologic | Bausch Lomb vs. Becton Dickinson and |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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