Correlation Between Okta and Short-term Income
Can any of the company-specific risk be diversified away by investing in both Okta and Short-term Income 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 Short-term Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Short Term Income Fund, you can compare the effects of market volatilities on Okta and Short-term Income 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 Short-term Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Short-term Income.
Diversification Opportunities for Okta and Short-term Income
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Okta and Short-term is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Short Term Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Income 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 Short-term Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Income has no effect on the direction of Okta i.e., Okta and Short-term Income go up and down completely randomly.
Pair Corralation between Okta and Short-term Income
Given the investment horizon of 90 days Okta Inc is expected to generate 43.56 times more return on investment than Short-term Income. However, Okta is 43.56 times more volatile than Short Term Income Fund. It trades about 0.13 of its potential returns per unit of risk. Short Term Income Fund is currently generating about 0.47 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 358.00 from holding Okta Inc or generate 4.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Okta Inc vs. Short Term Income Fund
Performance |
| Timeline |
| Okta Inc |
| Short Term Income |
Okta and Short-term Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Short-term Income
The main advantage of trading using opposite Okta and Short-term Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Short-term Income 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 Short-term Income will offset losses from the drop in Short-term Income's long position.The idea behind Okta Inc and Short Term Income Fund 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.| Short-term Income vs. Palmer Square Ssi | Short-term Income vs. Palmer Square Ultra Short | Short-term Income vs. Palmer Square Income | Short-term Income vs. The Hartford Midcap |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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