Correlation Between Okta and Inception Growth
Can any of the company-specific risk be diversified away by investing in both Okta and Inception Growth 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 Inception Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Inception Growth Acquisition, you can compare the effects of market volatilities on Okta and Inception Growth 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 Inception Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Inception Growth.
Diversification Opportunities for Okta and Inception Growth
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Okta and Inception is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Inception Growth Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inception Growth Acq 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 Inception Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inception Growth Acq has no effect on the direction of Okta i.e., Okta and Inception Growth go up and down completely randomly.
Pair Corralation between Okta and Inception Growth
Given the investment horizon of 90 days Okta is expected to generate 37.54 times less return on investment than Inception Growth. But when comparing it to its historical volatility, Okta Inc is 12.48 times less risky than Inception Growth. It trades about 0.15 of its potential returns per unit of risk. Inception Growth Acquisition is currently generating about 0.47 of returns per unit of risk over similar time horizon. If you would invest 3.65 in Inception Growth Acquisition on August 31, 2024 and sell it today you would earn a total of 3.85 from holding Inception Growth Acquisition or generate 105.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 40.91% |
| Values | Daily Returns |
Okta Inc vs. Inception Growth Acquisition
Performance |
| Timeline |
| Okta Inc |
| Inception Growth Acq |
Okta and Inception Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Inception Growth
The main advantage of trading using opposite Okta and Inception Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Inception Growth 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 Inception Growth will offset losses from the drop in Inception Growth's long position.The idea behind Okta Inc and Inception Growth Acquisition 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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