Correlation Between Okta and Bandwidth

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

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

Diversification Opportunities for Okta and Bandwidth

0.35

Correlation Coefficient

Okta  Bandwidth

Weak diversification

The 3 months correlation between Okta and Bandwidth is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Bandwidth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bandwidth 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 Bandwidth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bandwidth has no effect on the direction of Okta i.e., Okta and Bandwidth go up and down completely randomly.

Pair Corralation between Okta and Bandwidth

Given the investment horizon of 90 days Okta is expected to generate 2.21 times less return on investment than Bandwidth. But when comparing it to its historical volatility, Okta Inc is 1.72 times less risky than Bandwidth. It trades about 0.03 of its potential returns per unit of risk. Bandwidth is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,332  in Bandwidth on September 30, 2024 and sell it today you would earn a total of  400.00  from holding Bandwidth or generate 30.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Okta Inc  vs.  Bandwidth

Okta Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Okta Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Okta may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bandwidth

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Okta and Bandwidth

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

The idea behind Okta Inc and Bandwidth 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.