Correlation Between Okta and SJM Holdings
Can any of the company-specific risk be diversified away by investing in both Okta and SJM Holdings 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 SJM Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and SJM Holdings Ltd, you can compare the effects of market volatilities on Okta and SJM Holdings 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 SJM Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and SJM Holdings.
Diversification Opportunities for Okta and SJM Holdings
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Okta and SJM is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and SJM Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SJM Holdings 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 SJM Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SJM Holdings has no effect on the direction of Okta i.e., Okta and SJM Holdings go up and down completely randomly.
Pair Corralation between Okta and SJM Holdings
Given the investment horizon of 90 days Okta Inc is expected to generate 0.31 times more return on investment than SJM Holdings. However, Okta Inc is 3.27 times less risky than SJM Holdings. It trades about 0.13 of its potential returns per unit of risk. SJM Holdings Ltd is currently generating about -0.22 per unit of risk. If you would invest 7,325 in Okta Inc on August 29, 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 | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Okta Inc vs. SJM Holdings Ltd
Performance |
| Timeline |
| Okta Inc |
| SJM Holdings |
Okta and SJM Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and SJM Holdings
The main advantage of trading using opposite Okta and SJM Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, SJM Holdings 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 SJM Holdings will offset losses from the drop in SJM Holdings' long position.The idea behind Okta Inc and SJM Holdings Ltd 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.| SJM Holdings vs. Studio City International | SJM Holdings vs. Monarch Casino Resort | SJM Holdings vs. Playa Hotels Resorts | SJM Holdings vs. Las Vegas Sands |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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