Correlation Between Okta and First Bancshares
Can any of the company-specific risk be diversified away by investing in both Okta and First Bancshares 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 First Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and First Bancshares, you can compare the effects of market volatilities on Okta and First Bancshares 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 First Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and First Bancshares.
Diversification Opportunities for Okta and First Bancshares
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Okta and First is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and First Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancshares 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 First Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancshares has no effect on the direction of Okta i.e., Okta and First Bancshares go up and down completely randomly.
Pair Corralation between Okta and First Bancshares
Given the investment horizon of 90 days Okta is expected to generate 5.27 times less return on investment than First Bancshares. In addition to that, Okta is 2.03 times more volatile than First Bancshares. It trades about 0.02 of its total potential returns per unit of risk. First Bancshares is currently generating about 0.23 per unit of volatility. If you would invest 2,065 in First Bancshares on August 31, 2024 and sell it today you would earn a total of 210.00 from holding First Bancshares or generate 10.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 8.56% |
| Values | Daily Returns |
Okta Inc vs. First Bancshares
Performance |
| Timeline |
| Okta Inc |
| First Bancshares |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Okta and First Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and First Bancshares
The main advantage of trading using opposite Okta and First Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, First Bancshares 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 First Bancshares will offset losses from the drop in First Bancshares' long position.The idea behind Okta Inc and First Bancshares 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.| First Bancshares vs. Lewis Clark Bancorp | First Bancshares vs. Bank of Idaho | First Bancshares vs. Community Heritage Financial | First Bancshares vs. National Capital Bank |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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