Correlation Between Okta and Provident Financial
Can any of the company-specific risk be diversified away by investing in both Okta and Provident Financial 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 Provident Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Provident Financial Services, you can compare the effects of market volatilities on Okta and Provident Financial 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 Provident Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Provident Financial.
Diversification Opportunities for Okta and Provident Financial
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Okta and Provident is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Provident Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident Financial 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 Provident Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Financial has no effect on the direction of Okta i.e., Okta and Provident Financial go up and down completely randomly.
Pair Corralation between Okta and Provident Financial
Given the investment horizon of 90 days Okta is expected to generate 2.96 times less return on investment than Provident Financial. But when comparing it to its historical volatility, Okta Inc is 2.0 times less risky than Provident Financial. It trades about 0.13 of its potential returns per unit of risk. Provident Financial Services is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,910 in Provident Financial Services on August 28, 2024 and sell it today you would earn a total of 256.00 from holding Provident Financial Services or generate 13.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Okta Inc vs. Provident Financial Services
Performance |
| Timeline |
| Okta Inc |
| Provident Financial |
Okta and Provident Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Provident Financial
The main advantage of trading using opposite Okta and Provident Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Provident Financial 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 Provident Financial will offset losses from the drop in Provident Financial's long position.The idea behind Okta Inc and Provident Financial Services 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.| Provident Financial vs. First Mid Illinois | Provident Financial vs. ConnectOne Bancorp | Provident Financial vs. Finward Bancorp | Provident Financial vs. CrossFirst Bankshares |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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