Correlation Between Oracle and Okta

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

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

Diversification Opportunities for Oracle and Okta

-0.33

Correlation Coefficient

Oracle  Okta

Very good diversification

The 3 months correlation between Oracle and Okta is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Okta Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Okta Inc and Oracle 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 Oracle 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 Oracle i.e., Oracle and Okta go up and down completely randomly.

Pair Corralation between Oracle and Okta

Given the investment horizon of 90 days Oracle is expected to generate 1.32 times more return on investment than Okta. However, Oracle is 1.32 times more volatile than Okta Inc. It trades about 0.2 of its potential returns per unit of risk. Okta Inc is currently generating about -0.02 per unit of risk. If you would invest  14,097  in Oracle on August 30, 2024 and sell it today you would earn a total of  4,173  from holding Oracle or generate 29.6% return on investment over 90 days.

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

Oracle  vs.  Okta Inc

Oracle

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal fundamental indicators, Oracle disclosed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Oracle and Okta

The main advantage of trading using opposite Oracle and Okta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oracle 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 Oracle 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.