Correlation Between SPS Commerce and Okta
Can any of the company-specific risk be diversified away by investing in both SPS Commerce and Okta 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 SPS Commerce and Okta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPS Commerce and Okta Inc, you can compare the effects of market volatilities on SPS Commerce and Okta 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 SPS Commerce with a short position of Okta. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPS Commerce and Okta.
Diversification Opportunities for SPS Commerce and Okta
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SPS and Okta is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding SPS Commerce and Okta Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Okta Inc and SPS Commerce 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 SPS Commerce are associated (or correlated) with Okta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Okta Inc has no effect on the direction of SPS Commerce i.e., SPS Commerce and Okta go up and down completely randomly.
Pair Corralation between SPS Commerce and Okta
Given the investment horizon of 90 days SPS Commerce is expected to generate 1.29 times more return on investment than Okta. However, SPS Commerce is 1.29 times more volatile than Okta Inc. It trades about 0.27 of its potential returns per unit of risk. Okta Inc is currently generating about 0.13 per unit of risk. If you would invest 17,101 in SPS Commerce on August 28, 2024 and sell it today you would earn a total of 2,238 from holding SPS Commerce or generate 13.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPS Commerce vs. Okta Inc
Performance |
| Timeline |
| SPS Commerce |
| Okta Inc |
SPS Commerce and Okta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPS Commerce and Okta
The main advantage of trading using opposite SPS Commerce and Okta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPS Commerce position performs unexpectedly, Okta 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 Okta will offset losses from the drop in Okta's long position.The idea behind SPS Commerce and Okta Inc 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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