Correlation Between Okta and Wolfspeed
Can any of the company-specific risk be diversified away by investing in both Okta and Wolfspeed 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 Wolfspeed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Wolfspeed, you can compare the effects of market volatilities on Okta and Wolfspeed 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 Wolfspeed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Wolfspeed.
Diversification Opportunities for Okta and Wolfspeed
Modest diversification
The 3 months correlation between Okta and Wolfspeed is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Wolfspeed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wolfspeed 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 Wolfspeed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wolfspeed has no effect on the direction of Okta i.e., Okta and Wolfspeed go up and down completely randomly.
Pair Corralation between Okta and Wolfspeed
Given the investment horizon of 90 days Okta Inc is expected to generate 0.41 times more return on investment than Wolfspeed. However, Okta Inc is 2.41 times less risky than Wolfspeed. It trades about 0.02 of its potential returns per unit of risk. Wolfspeed is currently generating about -0.05 per unit of risk. If you would invest 7,261 in Okta Inc on August 24, 2024 and sell it today you would earn a total of 284.00 from holding Okta Inc or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Okta Inc vs. Wolfspeed
Performance |
| Timeline |
| Okta Inc |
| Wolfspeed |
Okta and Wolfspeed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Wolfspeed
The main advantage of trading using opposite Okta and Wolfspeed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Wolfspeed 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 Wolfspeed will offset losses from the drop in Wolfspeed's long position.The idea behind Okta Inc and Wolfspeed 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.| Wolfspeed vs. NXP Semiconductors NV | Wolfspeed vs. Analog Devices | Wolfspeed vs. Microchip Technology | Wolfspeed vs. Monolithic Power Systems |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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