Correlation Between Okta and Wave Life
Can any of the company-specific risk be diversified away by investing in both Okta and Wave Life 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 Wave Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and Wave Life Sciences, you can compare the effects of market volatilities on Okta and Wave Life 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 Wave Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and Wave Life.
Diversification Opportunities for Okta and Wave Life
Good diversification
The 3 months correlation between Okta and Wave is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Wave Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wave Life Sciences 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 Wave Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wave Life Sciences has no effect on the direction of Okta i.e., Okta and Wave Life go up and down completely randomly.
Pair Corralation between Okta and Wave Life
Given the investment horizon of 90 days Okta is expected to generate 1.18 times less return on investment than Wave Life. But when comparing it to its historical volatility, Okta Inc is 2.74 times less risky than Wave Life. It trades about 0.15 of its potential returns per unit of risk. Wave Life Sciences is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,432 in Wave Life Sciences on August 31, 2024 and sell it today you would earn a total of 67.00 from holding Wave Life Sciences or generate 4.68% 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. Wave Life Sciences
Performance |
| Timeline |
| Okta Inc |
| Wave Life Sciences |
Okta and Wave Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and Wave Life
The main advantage of trading using opposite Okta and Wave Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, Wave Life 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 Wave Life will offset losses from the drop in Wave Life's long position.The idea behind Okta Inc and Wave Life Sciences 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.| Wave Life vs. Arrowhead Pharmaceuticals | Wave Life vs. CytomX Therapeutics | Wave Life vs. Assembly Biosciences | Wave Life vs. Apellis Pharmaceuticals |
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 Stocks Directory module to find actively traded stocks across global markets.
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