Correlation Between Okta and M3
Can any of the company-specific risk be diversified away by investing in both Okta and M3 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 M3 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and M3 Inc, you can compare the effects of market volatilities on Okta and M3 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 M3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and M3.
Diversification Opportunities for Okta and M3
Good diversification
The 3 months correlation between Okta and M3 is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and M3 Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M3 Inc 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 M3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M3 Inc has no effect on the direction of Okta i.e., Okta and M3 go up and down completely randomly.
Pair Corralation between Okta and M3
Given the investment horizon of 90 days Okta Inc is expected to under-perform the M3. But the stock apears to be less risky and, when comparing its historical volatility, Okta Inc is 1.25 times less risky than M3. The stock trades about -0.06 of its potential returns per unit of risk. The M3 Inc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 483.00 in M3 Inc on August 26, 2024 and sell it today you would lose (21.00) from holding M3 Inc or give up 4.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Okta Inc vs. M3 Inc
Performance |
| Timeline |
| Okta Inc |
| M3 Inc |
Okta and M3 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and M3
The main advantage of trading using opposite Okta and M3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, M3 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 M3 will offset losses from the drop in M3's long position.The idea behind Okta Inc and M3 Inc 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 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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