Correlation Between Okta and Southern Rubber
Can any of the company-specific risk be diversified away by investing in both Okta and Southern Rubber 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 Southern Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Southern Rubber Industry, you can compare the effects of market volatilities on Okta and Southern Rubber 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 Southern Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Southern Rubber.
Diversification Opportunities for Okta and Southern Rubber
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Okta and Southern is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Southern Rubber Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Rubber Industry 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 Southern Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Rubber Industry has no effect on the direction of Okta i.e., Okta and Southern Rubber go up and down completely randomly.
Pair Corralation between Okta and Southern Rubber
Given the investment horizon of 90 days Okta is expected to generate 3.49 times less return on investment than Southern Rubber. But when comparing it to its historical volatility, Okta Inc is 1.86 times less risky than Southern Rubber. It trades about 0.15 of its potential returns per unit of risk. Southern Rubber Industry is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 1,135,000 in Southern Rubber Industry on August 31, 2024 and sell it today you would earn a total of 235,000 from holding Southern Rubber Industry or generate 20.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Okta Inc vs. Southern Rubber Industry
Performance |
| Timeline |
| Okta Inc |
| Southern Rubber Industry |
Okta and Southern Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Southern Rubber
The main advantage of trading using opposite Okta and Southern Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Southern Rubber 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 Southern Rubber will offset losses from the drop in Southern Rubber's long position.The idea behind Okta Inc and Southern Rubber Industry 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.| Southern Rubber vs. FIT INVEST JSC | Southern Rubber vs. Damsan JSC | Southern Rubber vs. An Phat Plastic | Southern Rubber vs. Alphanam ME |
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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