Correlation Between Okta and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both Okta and Direxion Daily 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 Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Direxion Daily Transportation, you can compare the effects of market volatilities on Okta and Direxion Daily 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 Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Direxion Daily.
Diversification Opportunities for Okta and Direxion Daily
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Okta and Direxion is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Direxion Daily Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Trans 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 Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily Trans has no effect on the direction of Okta i.e., Okta and Direxion Daily go up and down completely randomly.
Pair Corralation between Okta and Direxion Daily
Given the investment horizon of 90 days Okta Inc is expected to under-perform the Direxion Daily. But the stock apears to be less risky and, when comparing its historical volatility, Okta Inc is 1.3 times less risky than Direxion Daily. The stock trades about -0.01 of its potential returns per unit of risk. The Direxion Daily Transportation is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,240 in Direxion Daily Transportation on August 25, 2024 and sell it today you would earn a total of 619.00 from holding Direxion Daily Transportation or generate 19.1% 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. Direxion Daily Transportation
Performance |
| Timeline |
| Okta Inc |
| Direxion Daily Trans |
Okta and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Direxion Daily
The main advantage of trading using opposite Okta and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Direxion Daily 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 Direxion Daily will offset losses from the drop in Direxion Daily's long position.The idea behind Okta Inc and Direxion Daily Transportation 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.| Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. Direxion Daily Semiconductor | Direxion Daily vs. Direxion Daily Semiconductor |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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