Correlation Between Okta and Bayerische Motoren
Can any of the company-specific risk be diversified away by investing in both Okta and Bayerische Motoren 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 Bayerische Motoren into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Bayerische Motoren Werke, you can compare the effects of market volatilities on Okta and Bayerische Motoren 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 Bayerische Motoren. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Bayerische Motoren.
Diversification Opportunities for Okta and Bayerische Motoren
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Okta and Bayerische is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Bayerische Motoren Werke in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayerische Motoren Werke 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 Bayerische Motoren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayerische Motoren Werke has no effect on the direction of Okta i.e., Okta and Bayerische Motoren go up and down completely randomly.
Pair Corralation between Okta and Bayerische Motoren
Given the investment horizon of 90 days Okta Inc is expected to generate 0.75 times more return on investment than Bayerische Motoren. However, Okta Inc is 1.33 times less risky than Bayerische Motoren. It trades about 0.12 of its potential returns per unit of risk. Bayerische Motoren Werke is currently generating about -0.28 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 Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Okta Inc vs. Bayerische Motoren Werke
Performance |
| Timeline |
| Okta Inc |
| Bayerische Motoren Werke |
Okta and Bayerische Motoren Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Bayerische Motoren
The main advantage of trading using opposite Okta and Bayerische Motoren positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Bayerische Motoren 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 Bayerische Motoren will offset losses from the drop in Bayerische Motoren's long position.The idea behind Okta Inc and Bayerische Motoren Werke 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.| Bayerische Motoren vs. Mercedes Benz Group AG | Bayerische Motoren vs. Porsche Automobile Holding | Bayerische Motoren vs. Volkswagen AG 110 | Bayerische Motoren vs. Mercedes Benz Group AG |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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