Correlation Between Okta and IShares Edge
Can any of the company-specific risk be diversified away by investing in both Okta and IShares Edge 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 IShares Edge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and iShares Edge High, you can compare the effects of market volatilities on Okta and IShares Edge 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 IShares Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and IShares Edge.
Diversification Opportunities for Okta and IShares Edge
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Okta and IShares is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and iShares Edge High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Edge High 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 IShares Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Edge High has no effect on the direction of Okta i.e., Okta and IShares Edge go up and down completely randomly.
Pair Corralation between Okta and IShares Edge
Given the investment horizon of 90 days Okta Inc is expected to generate 7.37 times more return on investment than IShares Edge. However, Okta is 7.37 times more volatile than iShares Edge High. It trades about 0.03 of its potential returns per unit of risk. iShares Edge High is currently generating about 0.11 per unit of risk. If you would invest 6,194 in Okta Inc on August 26, 2024 and sell it today you would earn a total of 1,463 from holding Okta Inc or generate 23.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Okta Inc vs. iShares Edge High
Performance |
| Timeline |
| Okta Inc |
| iShares Edge High |
Okta and IShares Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and IShares Edge
The main advantage of trading using opposite Okta and IShares Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, IShares Edge 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 IShares Edge will offset losses from the drop in IShares Edge's long position.The idea behind Okta Inc and iShares Edge High 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.| IShares Edge vs. iShares Edge Investment | IShares Edge vs. iShares Interest Rate | IShares Edge vs. iShares Fallen Angels | IShares Edge vs. iShares Intl High |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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