Correlation Between Okta and Xtrackers
Can any of the company-specific risk be diversified away by investing in both Okta and Xtrackers 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 Xtrackers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Xtrackers SP 500, you can compare the effects of market volatilities on Okta and Xtrackers 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 Xtrackers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Xtrackers.
Diversification Opportunities for Okta and Xtrackers
Good diversification
The 3 months correlation between Okta and Xtrackers is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Xtrackers SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers SP 500 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 Xtrackers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers SP 500 has no effect on the direction of Okta i.e., Okta and Xtrackers go up and down completely randomly.
Pair Corralation between Okta and Xtrackers
Given the investment horizon of 90 days Okta Inc is expected to generate 2.02 times more return on investment than Xtrackers. However, Okta is 2.02 times more volatile than Xtrackers SP 500. It trades about 0.16 of its potential returns per unit of risk. Xtrackers SP 500 is currently generating about 0.14 per unit of risk. If you would invest 7,224 in Okta Inc on August 26, 2024 and sell it today you would earn a total of 433.00 from holding Okta Inc or generate 5.99% 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. Xtrackers SP 500
Performance |
| Timeline |
| Okta Inc |
| Xtrackers SP 500 |
Okta and Xtrackers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Xtrackers
The main advantage of trading using opposite Okta and Xtrackers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Xtrackers 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 Xtrackers will offset losses from the drop in Xtrackers' long position.The idea behind Okta Inc and Xtrackers SP 500 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.| Xtrackers vs. Morningstar Unconstrained Allocation | Xtrackers vs. High Yield Municipal Fund | Xtrackers vs. Via Renewables | Xtrackers vs. Knife River |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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