Correlation Between Morgan Stanley and Okta

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

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

Diversification Opportunities for Morgan Stanley and Okta

0.83

Correlation Coefficient

Morgan Stanley  Okta

Very poor diversification

The 3 months correlation between Morgan and Okta is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Okta Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Okta Inc and Morgan Stanley 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 Morgan Stanley Direct 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 Morgan Stanley i.e., Morgan Stanley and Okta go up and down completely randomly.

Pair Corralation between Morgan Stanley and Okta

Given the investment horizon of 90 days Morgan Stanley is expected to generate 2.54 times less return on investment than Okta. But when comparing it to its historical volatility, Morgan Stanley Direct is 2.36 times less risky than Okta. It trades about 0.09 of its potential returns per unit of risk. Okta Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,166  in Okta Inc on October 15, 2024 and sell it today you would earn a total of  950.00  from holding Okta Inc or generate 13.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Morgan Stanley Direct  vs.  Okta Inc

Morgan Stanley Direct

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Okta Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Okta Inc are ranked lower than 7 (%) 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.

Pair Trading with Morgan Stanley and Okta

The main advantage of trading using opposite Morgan Stanley and Okta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley 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 Morgan Stanley Direct 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.

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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.