Correlation Between Okta and Alphabet
Can any of the company-specific risk be diversified away by investing in both Okta and Alphabet 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 Alphabet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Alphabet Inc Class A, you can compare the effects of market volatilities on Okta and Alphabet 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 Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Alphabet.
Diversification Opportunities for Okta and Alphabet
Average diversification
The 3 months correlation between Okta and Alphabet is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Alphabet Inc Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class A 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class A has no effect on the direction of Okta i.e., Okta and Alphabet go up and down completely randomly.
Pair Corralation between Okta and Alphabet
Given the investment horizon of 90 days Okta Inc is expected to generate 0.87 times more return on investment than Alphabet. However, Okta Inc is 1.15 times less risky than Alphabet. It trades about 0.1 of its potential returns per unit of risk. Alphabet Inc Class A is currently generating about 0.0 per unit of risk. If you would invest 7,381 in Okta Inc on August 30, 2024 and sell it today you would earn a total of 261.00 from holding Okta Inc or generate 3.54% 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. Alphabet Inc Class A
Performance |
| Timeline |
| Okta Inc |
| Alphabet Class A |
Okta and Alphabet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Alphabet
The main advantage of trading using opposite Okta and Alphabet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Alphabet 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 Alphabet will offset losses from the drop in Alphabet's long position.The idea behind Okta Inc and Alphabet Inc Class A 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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