Correlation Between Okta and China Automotive
Can any of the company-specific risk be diversified away by investing in both Okta and China Automotive 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 China Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and China Automotive Systems, you can compare the effects of market volatilities on Okta and China Automotive 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 China Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and China Automotive.
Diversification Opportunities for Okta and China Automotive
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Okta and China is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and China Automotive Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Automotive Systems 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 China Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Automotive Systems has no effect on the direction of Okta i.e., Okta and China Automotive go up and down completely randomly.
Pair Corralation between Okta and China Automotive
Given the investment horizon of 90 days Okta Inc is expected to generate 0.62 times more return on investment than China Automotive. However, Okta Inc is 1.62 times less risky than China Automotive. It trades about 0.19 of its potential returns per unit of risk. China Automotive Systems is currently generating about 0.03 per unit of risk. If you would invest 7,240 in Okta Inc on August 31, 2024 and sell it today you would earn a total of 516.00 from holding Okta Inc or generate 7.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Okta Inc vs. China Automotive Systems
Performance |
| Timeline |
| Okta Inc |
| China Automotive Systems |
Okta and China Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and China Automotive
The main advantage of trading using opposite Okta and China Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, China Automotive 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 China Automotive will offset losses from the drop in China Automotive's long position.The idea behind Okta Inc and China Automotive Systems 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.| China Automotive vs. Dorman Products | China Automotive vs. Monro Muffler Brake | China Automotive vs. Standard Motor Products | China Automotive vs. Stoneridge |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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