Correlation Between Okta and STMICROELECTRONICS

Can any of the company-specific risk be diversified away by investing in both Okta and STMICROELECTRONICS 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 STMICROELECTRONICS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Okta Inc and STMICROELECTRONICS, you can compare the effects of market volatilities on Okta and STMICROELECTRONICS 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 STMICROELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and STMICROELECTRONICS.

Diversification Opportunities for Okta and STMICROELECTRONICS

-0.34

Correlation Coefficient

Okta  STMICROELECTRONICS

Very good diversification

The 3 months correlation between Okta and STMICROELECTRONICS is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS 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 STMICROELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMICROELECTRONICS has no effect on the direction of Okta i.e., Okta and STMICROELECTRONICS go up and down completely randomly.

Pair Corralation between Okta and STMICROELECTRONICS

Assuming the 90 days horizon Okta Inc is expected to generate 1.1 times more return on investment than STMICROELECTRONICS. However, Okta is 1.1 times more volatile than STMICROELECTRONICS. It trades about 0.18 of its potential returns per unit of risk. STMICROELECTRONICS is currently generating about -0.03 per unit of risk. If you would invest  6,622  in Okta Inc on October 25, 2024 and sell it today you would earn a total of  1,812  from holding Okta Inc or generate 27.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Okta Inc  vs.  STMICROELECTRONICS

Okta Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Okta Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Okta reported solid returns over the last few months and may actually be approaching a breakup point.

STMICROELECTRONICS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMICROELECTRONICS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, STMICROELECTRONICS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Okta and STMICROELECTRONICS

The main advantage of trading using opposite Okta and STMICROELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, STMICROELECTRONICS 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 STMICROELECTRONICS will offset losses from the drop in STMICROELECTRONICS's long position.

The idea behind Okta Inc and STMICROELECTRONICS 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.