Correlation Between Gen Digital and Okta

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

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

Diversification Opportunities for Gen Digital and Okta

-0.21

Correlation Coefficient

Gen Digital  Okta

Very good diversification

The 3 months correlation between Gen and Okta is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Gen Digital and Okta Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Okta Inc and Gen Digital 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 Gen Digital 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 Gen Digital i.e., Gen Digital and Okta go up and down completely randomly.

Pair Corralation between Gen Digital and Okta

Considering the 90-day investment horizon Gen Digital is expected to generate 1.13 times more return on investment than Okta. However, Gen Digital is 1.13 times more volatile than Okta Inc. It trades about -0.13 of its potential returns per unit of risk. Okta Inc is currently generating about -0.3 per unit of risk. If you would invest  2,141  in Gen Digital on January 19, 2024 and sell it today you would lose (104.00) from holding Gen Digital or give up 4.86% of portfolio value over 90 days.

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

Gen Digital  vs.  Okta Inc

Gen Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gen Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gen Digital and Okta

The main advantage of trading using opposite Gen Digital and Okta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gen Digital 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 Gen Digital 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.