Correlation Between Okta and BQE Water
Can any of the company-specific risk be diversified away by investing in both Okta and BQE Water 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 BQE Water into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and BQE Water, you can compare the effects of market volatilities on Okta and BQE Water 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 BQE Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and BQE Water.
Diversification Opportunities for Okta and BQE Water
Very weak diversification
The 3 months correlation between Okta and BQE is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and BQE Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BQE Water 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 BQE Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BQE Water has no effect on the direction of Okta i.e., Okta and BQE Water go up and down completely randomly.
Pair Corralation between Okta and BQE Water
Given the investment horizon of 90 days Okta Inc is expected to under-perform the BQE Water. But the stock apears to be less risky and, when comparing its historical volatility, Okta Inc is 1.42 times less risky than BQE Water. The stock trades about -0.04 of its potential returns per unit of risk. The BQE Water is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 4,500 in BQE Water on August 29, 2024 and sell it today you would lose (700.00) from holding BQE Water or give up 15.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Okta Inc vs. BQE Water
Performance |
| Timeline |
| Okta Inc |
| BQE Water |
Okta and BQE Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and BQE Water
The main advantage of trading using opposite Okta and BQE Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, BQE Water 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 BQE Water will offset losses from the drop in BQE Water's long position.The idea behind Okta Inc and BQE Water 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.| BQE Water vs. Deere Company | BQE Water vs. Columbus McKinnon | BQE Water vs. Hyster Yale Materials Handling | BQE Water vs. Manitowoc |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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