Correlation Between Okta and ZA
Can any of the company-specific risk be diversified away by investing in both Okta and ZA 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 ZA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and ZA Group, you can compare the effects of market volatilities on Okta and ZA 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 ZA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and ZA.
Diversification Opportunities for Okta and ZA
Excellent diversification
The 3 months correlation between Okta and ZA is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and ZA Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZA Group 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 ZA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZA Group has no effect on the direction of Okta i.e., Okta and ZA go up and down completely randomly.
Pair Corralation between Okta and ZA
Given the investment horizon of 90 days Okta Inc is expected to under-perform the ZA. But the stock apears to be less risky and, when comparing its historical volatility, Okta Inc is 90.28 times less risky than ZA. The stock trades about -0.12 of its potential returns per unit of risk. The ZA Group is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 0.00 in ZA Group on August 28, 2024 and sell it today you would earn a total of 0.01 from holding ZA Group or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
Okta Inc vs. ZA Group
Performance |
| Timeline |
| Okta Inc |
| ZA Group |
Okta and ZA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Okta and ZA
The main advantage of trading using opposite Okta and ZA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, ZA 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 ZA will offset losses from the drop in ZA's long position.The idea behind Okta Inc and ZA Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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