Correlation Between Okta and Dropbox

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

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

Diversification Opportunities for Okta and Dropbox

-0.62

Correlation Coefficient

Okta  Dropbox

Excellent diversification

The 3 months correlation between Okta and Dropbox is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and Dropbox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dropbox 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 Dropbox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dropbox has no effect on the direction of Okta i.e., Okta and Dropbox go up and down completely randomly.

Pair Corralation between Okta and Dropbox

Given the investment horizon of 90 days Okta Inc is expected to under-perform the Dropbox. In addition to that, Okta is 1.45 times more volatile than Dropbox. It trades about -0.32 of its total potential returns per unit of risk. Dropbox is currently generating about -0.01 per unit of volatility. If you would invest  2,431  in Dropbox on January 31, 2024 and sell it today you would lose (11.00) from holding Dropbox or give up 0.45% of portfolio value over 90 days.

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

Okta Inc  vs.  Dropbox

Okta Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Okta Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Okta sustained solid returns over the last few months and may actually be approaching a breakup point.

Dropbox

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dropbox has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Okta and Dropbox

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

The idea behind Okta Inc and Dropbox 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.