Correlation Between Okta and Snowflake
Can any of the company-specific risk be diversified away by investing in both Okta and Snowflake 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 Snowflake into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Snowflake, you can compare the effects of market volatilities on Okta and Snowflake 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 Snowflake. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Snowflake.
Diversification Opportunities for Okta and Snowflake
Significant diversification
The 3 months correlation between Okta and Snowflake is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Snowflake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snowflake 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 Snowflake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snowflake has no effect on the direction of Okta i.e., Okta and Snowflake go up and down completely randomly.
Pair Corralation between Okta and Snowflake
Given the investment horizon of 90 days Okta Inc is expected to under-perform the Snowflake. But the stock apears to be less risky and, when comparing its historical volatility, Okta Inc is 1.62 times less risky than Snowflake. The stock trades about -0.03 of its potential returns per unit of risk. The Snowflake is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 13,693 in Snowflake on August 30, 2024 and sell it today you would earn a total of 3,677 from holding Snowflake or generate 26.85% 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. Snowflake
Performance |
| Timeline |
| Okta Inc |
| Snowflake |
Okta and Snowflake Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Snowflake
The main advantage of trading using opposite Okta and Snowflake positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Snowflake 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 Snowflake will offset losses from the drop in Snowflake's long position.The idea behind Okta Inc and Snowflake 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.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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |