Correlation Between Okta and Varonis Systems

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

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

Diversification Opportunities for Okta and Varonis Systems

-0.6

Correlation Coefficient

Okta  Varonis Systems

Excellent diversification

The 3 months correlation between Okta and Varonis is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Varonis Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varonis Systems 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 Varonis Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Varonis Systems has no effect on the direction of Okta i.e., Okta and Varonis Systems go up and down completely randomly.

Pair Corralation between Okta and Varonis Systems

Given the investment horizon of 90 days Okta Inc is expected to generate 0.97 times more return on investment than Varonis Systems. However, Okta Inc is 1.03 times less risky than Varonis Systems. It trades about 0.09 of its potential returns per unit of risk. Varonis Systems is currently generating about -0.17 per unit of risk. If you would invest  7,181  in Okta Inc on October 5, 2024 and sell it today you would earn a total of  702.00  from holding Okta Inc or generate 9.78% return on investment over 90 days.

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

Okta Inc  vs.  Varonis Systems

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 February 2025.

Varonis Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Varonis Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Okta and Varonis Systems

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

The idea behind Okta Inc and Varonis Systems 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.