Correlation Between Okta and Microsoft

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

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

Diversification Opportunities for Okta and Microsoft

-0.14

Correlation Coefficient

Okta  Microsoft

Good diversification

The 3 months correlation between Okta and Microsoft is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Okta i.e., Okta and Microsoft go up and down completely randomly.

Pair Corralation between Okta and Microsoft

Given the investment horizon of 90 days Okta Inc is expected to generate 1.0 times more return on investment than Microsoft. However, Okta Inc is 1.0 times less risky than Microsoft. It trades about 0.1 of its potential returns per unit of risk. Microsoft is currently generating about -0.04 per unit of risk. If you would invest  7,381  in Okta Inc on August 30, 2024 and sell it today you would earn a total of  261.00  from holding Okta Inc or generate 3.54% return on investment over 90 days.

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

Okta Inc  vs.  Microsoft

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 somewhat strong basic indicators, Okta is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Microsoft

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Okta and Microsoft

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

The idea behind Okta Inc and Microsoft 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.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.