Correlation Between Okta and Bank of China Limited
Can any of the company-specific risk be diversified away by investing in both Okta and Bank of China Limited 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 Bank of China Limited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Bank of China, you can compare the effects of market volatilities on Okta and Bank of China Limited 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 Bank of China Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Bank of China Limited.
Diversification Opportunities for Okta and Bank of China Limited
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Okta and Bank is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Bank of China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of China Limited 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 Bank of China Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of China Limited has no effect on the direction of Okta i.e., Okta and Bank of China Limited go up and down completely randomly.
Pair Corralation between Okta and Bank of China Limited
Given the investment horizon of 90 days Okta is expected to generate 1.17 times less return on investment than Bank of China Limited. In addition to that, Okta is 1.02 times more volatile than Bank of China. It trades about 0.06 of its total potential returns per unit of risk. Bank of China is currently generating about 0.07 per unit of volatility. If you would invest 43.00 in Bank of China on August 28, 2024 and sell it today you would earn a total of 2.00 from holding Bank of China or generate 4.65% 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. Bank of China
Performance |
| Timeline |
| Okta Inc |
| Bank of China Limited |
Okta and Bank of China Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Bank of China Limited
The main advantage of trading using opposite Okta and Bank of China Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Bank of China Limited 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 Bank of China Limited will offset losses from the drop in Bank of China Limited's long position.The idea behind Okta Inc and Bank of China 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.| Bank of China Limited vs. Superior Plus Corp | Bank of China Limited vs. NMI Holdings | Bank of China Limited vs. Origin Agritech | Bank of China Limited vs. SIVERS SEMICONDUCTORS AB |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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