Correlation Between Okta and Sono Tek
Can any of the company-specific risk be diversified away by investing in both Okta and Sono Tek 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 Sono Tek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Sono Tek Corp, you can compare the effects of market volatilities on Okta and Sono Tek 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 Sono Tek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Sono Tek.
Diversification Opportunities for Okta and Sono Tek
Good diversification
The 3 months correlation between Okta and Sono is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Sono Tek Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sono Tek Corp 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 Sono Tek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sono Tek Corp has no effect on the direction of Okta i.e., Okta and Sono Tek go up and down completely randomly.
Pair Corralation between Okta and Sono Tek
Given the investment horizon of 90 days Okta Inc is expected to generate 0.92 times more return on investment than Sono Tek. However, Okta Inc is 1.09 times less risky than Sono Tek. It trades about 0.13 of its potential returns per unit of risk. Sono Tek Corp is currently generating about 0.09 per unit of risk. If you would invest 7,325 in Okta Inc on August 27, 2024 and sell it today you would earn a total of 332.00 from holding Okta Inc or generate 4.53% 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. Sono Tek Corp
Performance |
| Timeline |
| Okta Inc |
| Sono Tek Corp |
Okta and Sono Tek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Sono Tek
The main advantage of trading using opposite Okta and Sono Tek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Sono Tek 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 Sono Tek will offset losses from the drop in Sono Tek's long position.The idea behind Okta Inc and Sono Tek Corp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
Other Complementary Tools
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon |