Correlation Between Okta and CNB Financial
Can any of the company-specific risk be diversified away by investing in both Okta and CNB Financial 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 CNB Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and CNB Financial, you can compare the effects of market volatilities on Okta and CNB Financial 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 CNB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and CNB Financial.
Diversification Opportunities for Okta and CNB Financial
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Okta and CNB is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and CNB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNB Financial 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 CNB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNB Financial has no effect on the direction of Okta i.e., Okta and CNB Financial go up and down completely randomly.
Pair Corralation between Okta and CNB Financial
Given the investment horizon of 90 days Okta Inc is expected to generate 1.72 times more return on investment than CNB Financial. However, Okta is 1.72 times more volatile than CNB Financial. It trades about 0.03 of its potential returns per unit of risk. CNB Financial is currently generating about 0.02 per unit of risk. If you would invest 6,194 in Okta Inc on August 24, 2024 and sell it today you would earn a total of 1,351 from holding Okta Inc or generate 21.81% 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. CNB Financial
Performance |
| Timeline |
| Okta Inc |
| CNB Financial |
Okta and CNB Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and CNB Financial
The main advantage of trading using opposite Okta and CNB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, CNB Financial 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 CNB Financial will offset losses from the drop in CNB Financial's long position.The idea behind Okta Inc and CNB Financial 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.| CNB Financial vs. Capital One Financial | CNB Financial vs. Capital One Financial | CNB Financial vs. Bank of America | CNB Financial vs. KeyCorp |
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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