Correlation Between Amazon and Okta
Can any of the company-specific risk be diversified away by investing in both Amazon 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 Amazon and Okta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Okta Inc, you can compare the effects of market volatilities on Amazon 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 Amazon with a short position of Okta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Okta.
Diversification Opportunities for Amazon and Okta
Very weak diversification
The 3 months correlation between Amazon and Okta is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Okta Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Okta Inc and Amazon 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 Amazon Inc 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 Amazon i.e., Amazon and Okta go up and down completely randomly.
Pair Corralation between Amazon and Okta
Given the investment horizon of 90 days Amazon Inc is expected to generate 1.03 times more return on investment than Okta. However, Amazon is 1.03 times more volatile than Okta Inc. It trades about -0.02 of its potential returns per unit of risk. Okta Inc is currently generating about -0.35 per unit of risk. If you would invest 18,097 in Amazon Inc on January 30, 2024 and sell it today you would lose (135.00) from holding Amazon Inc or give up 0.75% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Amazon Inc vs. Okta Inc
Performance |
Timeline |
Amazon Inc |
Okta Inc |
Amazon and Okta Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Amazon and Okta
The main advantage of trading using opposite Amazon and Okta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.Amazon vs. Qurate Retail | Amazon vs. Kidpik Corp | Amazon vs. Natural Health Trend | Amazon vs. Liquidity Services |
Check out your portfolio center.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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