Correlation Between Okta and Americafirst Defensive
Can any of the company-specific risk be diversified away by investing in both Okta and Americafirst Defensive 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 Americafirst Defensive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Americafirst Defensive Growth, you can compare the effects of market volatilities on Okta and Americafirst Defensive 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 Americafirst Defensive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Americafirst Defensive.
Diversification Opportunities for Okta and Americafirst Defensive
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Okta and Americafirst is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Americafirst Defensive Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Americafirst Defensive 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 Americafirst Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Americafirst Defensive has no effect on the direction of Okta i.e., Okta and Americafirst Defensive go up and down completely randomly.
Pair Corralation between Okta and Americafirst Defensive
Given the investment horizon of 90 days Okta Inc is expected to under-perform the Americafirst Defensive. In addition to that, Okta is 5.0 times more volatile than Americafirst Defensive Growth. It trades about -0.03 of its total potential returns per unit of risk. Americafirst Defensive Growth is currently generating about 0.08 per unit of volatility. If you would invest 814.00 in Americafirst Defensive Growth on August 30, 2024 and sell it today you would earn a total of 40.00 from holding Americafirst Defensive Growth or generate 4.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Okta Inc vs. Americafirst Defensive Growth
Performance |
| Timeline |
| Okta Inc |
| Americafirst Defensive |
Okta and Americafirst Defensive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Americafirst Defensive
The main advantage of trading using opposite Okta and Americafirst Defensive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Americafirst Defensive 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 Americafirst Defensive will offset losses from the drop in Americafirst Defensive's long position.The idea behind Okta Inc and Americafirst Defensive Growth 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.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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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