Correlation Between Adobe Systems and Okta

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

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

Diversification Opportunities for Adobe Systems and Okta

0.45

Correlation Coefficient

Adobe Systems  Okta

Very weak diversification

The 3 months correlation between Adobe and Okta is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Adobe Systems Incorporated and Okta Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Okta Inc and Adobe Systems 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 Adobe Systems Incorporated 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 Adobe Systems i.e., Adobe Systems and Okta go up and down completely randomly.

Pair Corralation between Adobe Systems and Okta

Given the investment horizon of 90 days Adobe Systems Incorporated is expected to generate 0.71 times more return on investment than Okta. However, Adobe Systems Incorporated is 1.41 times less risky than Okta. It trades about -0.06 of its potential returns per unit of risk. Okta Inc is currently generating about -0.12 per unit of risk. If you would invest  55,944  in Adobe Systems Incorporated on August 25, 2024 and sell it today you would lose (4,729) from holding Adobe Systems Incorporated or give up 8.45% of portfolio value over 90 days.

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

Adobe Systems Incorporated  vs.  Okta Inc

Adobe Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adobe Systems Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Okta Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Okta Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Adobe Systems and Okta

The main advantage of trading using opposite Adobe Systems and Okta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adobe Systems 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 Adobe Systems Incorporated 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.