Correlation Between Okta and Northern Technologies
Can any of the company-specific risk be diversified away by investing in both Okta and Northern Technologies 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 Northern Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Northern Technologies, you can compare the effects of market volatilities on Okta and Northern Technologies 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 Northern Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Northern Technologies.
Diversification Opportunities for Okta and Northern Technologies
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Okta and Northern is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Northern Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Technologies 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 Northern Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Technologies has no effect on the direction of Okta i.e., Okta and Northern Technologies go up and down completely randomly.
Pair Corralation between Okta and Northern Technologies
Given the investment horizon of 90 days Okta is expected to generate 2.02 times less return on investment than Northern Technologies. But when comparing it to its historical volatility, Okta Inc is 1.77 times less risky than Northern Technologies. It trades about 0.13 of its potential returns per unit of risk. Northern Technologies is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,245 in Northern Technologies on August 27, 2024 and sell it today you would earn a total of 112.00 from holding Northern Technologies or generate 9.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Okta Inc vs. Northern Technologies
Performance |
| Timeline |
| Okta Inc |
| Northern Technologies |
Okta and Northern Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Northern Technologies
The main advantage of trading using opposite Okta and Northern Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Northern Technologies 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 Northern Technologies will offset losses from the drop in Northern Technologies' long position.The idea behind Okta Inc and Northern Technologies 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.| Northern Technologies vs. Innospec | Northern Technologies vs. H B Fuller | Northern Technologies vs. Quaker Chemical | Northern Technologies vs. Minerals Technologies |
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 CEOs Directory module to screen CEOs from public companies around the world.
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