Correlation Between Okta and Middlesex Water
Can any of the company-specific risk be diversified away by investing in both Okta and Middlesex Water 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 Middlesex Water into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Middlesex Water, you can compare the effects of market volatilities on Okta and Middlesex Water 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 Middlesex Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Middlesex Water.
Diversification Opportunities for Okta and Middlesex Water
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Okta and Middlesex is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Middlesex Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Middlesex Water 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 Middlesex Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Middlesex Water has no effect on the direction of Okta i.e., Okta and Middlesex Water go up and down completely randomly.
Pair Corralation between Okta and Middlesex Water
Given the investment horizon of 90 days Okta is expected to generate 1.34 times less return on investment than Middlesex Water. But when comparing it to its historical volatility, Okta Inc is 1.31 times less risky than Middlesex Water. It trades about 0.13 of its potential returns per unit of risk. Middlesex Water is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 6,412 in Middlesex Water on August 27, 2024 and sell it today you would earn a total of 376.00 from holding Middlesex Water or generate 5.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Okta Inc vs. Middlesex Water
Performance |
| Timeline |
| Okta Inc |
| Middlesex Water |
Okta and Middlesex Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Middlesex Water
The main advantage of trading using opposite Okta and Middlesex Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Middlesex Water 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 Middlesex Water will offset losses from the drop in Middlesex Water's long position.The idea behind Okta Inc and Middlesex Water 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.| Middlesex Water vs. SJW Group Common | Middlesex Water vs. American States Water | Middlesex Water vs. The York Water | Middlesex Water vs. Artesian Resources |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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