Correlation Between Okta and Generic Sweden
Can any of the company-specific risk be diversified away by investing in both Okta and Generic Sweden 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 Generic Sweden into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Generic Sweden publ, you can compare the effects of market volatilities on Okta and Generic Sweden 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 Generic Sweden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Generic Sweden.
Diversification Opportunities for Okta and Generic Sweden
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Okta and Generic is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Generic Sweden publ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generic Sweden publ 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 Generic Sweden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generic Sweden publ has no effect on the direction of Okta i.e., Okta and Generic Sweden go up and down completely randomly.
Pair Corralation between Okta and Generic Sweden
Given the investment horizon of 90 days Okta Inc is not expected to generate positive returns. Moreover, Okta is 1.13 times more volatile than Generic Sweden publ. It trades away all of its potential returns to assume current level of volatility. Generic Sweden publ is currently generating about -0.03 per unit of risk. If you would invest 8,265 in Okta Inc on August 28, 2024 and sell it today you would lose (615.00) from holding Okta Inc or give up 7.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Okta Inc vs. Generic Sweden publ
Performance |
| Timeline |
| Okta Inc |
| Generic Sweden publ |
Okta and Generic Sweden Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Generic Sweden
The main advantage of trading using opposite Okta and Generic Sweden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Generic Sweden 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 Generic Sweden will offset losses from the drop in Generic Sweden's long position.The idea behind Okta Inc and Generic Sweden publ 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.| Generic Sweden vs. FormPipe Software AB | Generic Sweden vs. Novotek AB | Generic Sweden vs. Hanza AB | Generic Sweden vs. Genovis AB |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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