Correlation Between Okta and LGL
Can any of the company-specific risk be diversified away by investing in both Okta and LGL 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 LGL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and LGL Group, you can compare the effects of market volatilities on Okta and LGL 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 LGL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and LGL.
Diversification Opportunities for Okta and LGL
Very good diversification
The 3 months correlation between Okta and LGL is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and LGL Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGL Group 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 LGL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LGL Group has no effect on the direction of Okta i.e., Okta and LGL go up and down completely randomly.
Pair Corralation between Okta and LGL
Given the investment horizon of 90 days Okta Inc is expected to generate 0.8 times more return on investment than LGL. However, Okta Inc is 1.25 times less risky than LGL. It trades about 0.13 of its potential returns per unit of risk. LGL Group is currently generating about 0.02 per unit of risk. If you would invest 7,325 in Okta Inc on August 28, 2024 and sell it today you would earn a total of 325.00 from holding Okta Inc or generate 4.44% 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. LGL Group
Performance |
| Timeline |
| Okta Inc |
| LGL Group |
Okta and LGL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and LGL
The main advantage of trading using opposite Okta and LGL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, LGL 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 LGL will offset losses from the drop in LGL's long position.The idea behind Okta Inc and LGL Group 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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