Correlation Between Okta and Federal Home
Can any of the company-specific risk be diversified away by investing in both Okta and Federal Home 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 Federal Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Federal Home Loan, you can compare the effects of market volatilities on Okta and Federal Home 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 Federal Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Federal Home.
Diversification Opportunities for Okta and Federal Home
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Okta and Federal is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Federal Home Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home Loan 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 Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home Loan has no effect on the direction of Okta i.e., Okta and Federal Home go up and down completely randomly.
Pair Corralation between Okta and Federal Home
Given the investment horizon of 90 days Okta is expected to generate 13.06 times less return on investment than Federal Home. But when comparing it to its historical volatility, Okta Inc is 8.92 times less risky than Federal Home. It trades about 0.22 of its potential returns per unit of risk. Federal Home Loan is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 650.00 in Federal Home Loan on September 1, 2024 and sell it today you would earn a total of 870.00 from holding Federal Home Loan or generate 133.85% 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. Federal Home Loan
Performance |
| Timeline |
| Okta Inc |
| Federal Home Loan |
Okta and Federal Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Federal Home
The main advantage of trading using opposite Okta and Federal Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Federal Home 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 Federal Home will offset losses from the drop in Federal Home's long position.The idea behind Okta Inc and Federal Home Loan 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.| Federal Home vs. Federal National Mortgage | Federal Home vs. Federal National Mortgage | Federal Home vs. Federal National Mortgage | Federal Home vs. Federal National Mortgage |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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