Correlation Between Okta and Signature Bank
Can any of the company-specific risk be diversified away by investing in both Okta and Signature Bank 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 Signature Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Signature Bank, you can compare the effects of market volatilities on Okta and Signature Bank 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 Signature Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Signature Bank.
Diversification Opportunities for Okta and Signature Bank
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Okta and Signature is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Signature Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Signature Bank 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 Signature Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Signature Bank has no effect on the direction of Okta i.e., Okta and Signature Bank go up and down completely randomly.
Pair Corralation between Okta and Signature Bank
Given the investment horizon of 90 days Okta is expected to generate 2.61 times less return on investment than Signature Bank. But when comparing it to its historical volatility, Okta Inc is 5.74 times less risky than Signature Bank. It trades about 0.02 of its potential returns per unit of risk. Signature Bank is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 13.00 in Signature Bank on September 1, 2024 and sell it today you would lose (3.00) from holding Signature Bank or give up 23.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 8.33% |
| Values | Daily Returns |
Okta Inc vs. Signature Bank
Performance |
| Timeline |
| Okta Inc |
| Signature Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Okta and Signature Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Signature Bank
The main advantage of trading using opposite Okta and Signature Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Signature Bank 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 Signature Bank will offset losses from the drop in Signature Bank's long position.The idea behind Okta Inc and Signature Bank 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.| Signature Bank vs. Zions Bancorporation | Signature Bank vs. KeyCorp | Signature Bank vs. Comerica | Signature Bank vs. First Horizon National |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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