Correlation Between Okta and New Perspective
Can any of the company-specific risk be diversified away by investing in both Okta and New Perspective 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 New Perspective into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and New Perspective Fund, you can compare the effects of market volatilities on Okta and New Perspective 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 New Perspective. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and New Perspective.
Diversification Opportunities for Okta and New Perspective
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Okta and New is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and New Perspective Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Perspective 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 New Perspective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Perspective has no effect on the direction of Okta i.e., Okta and New Perspective go up and down completely randomly.
Pair Corralation between Okta and New Perspective
Given the investment horizon of 90 days Okta is expected to generate 1.69 times less return on investment than New Perspective. In addition to that, Okta is 3.48 times more volatile than New Perspective Fund. It trades about 0.02 of its total potential returns per unit of risk. New Perspective Fund is currently generating about 0.11 per unit of volatility. If you would invest 5,296 in New Perspective Fund on August 24, 2024 and sell it today you would earn a total of 1,261 from holding New Perspective Fund or generate 23.81% 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. New Perspective Fund
Performance |
| Timeline |
| Okta Inc |
| New Perspective |
Okta and New Perspective Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and New Perspective
The main advantage of trading using opposite Okta and New Perspective positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, New Perspective 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 New Perspective will offset losses from the drop in New Perspective's long position.The idea behind Okta Inc and New Perspective 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.| New Perspective vs. Washington Mutual Investors | New Perspective vs. American Balanced Fund | New Perspective vs. New World Fund | New Perspective vs. Europacific Growth Fund |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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