Correlation Between Herzfeld Caribbean and Praxis Growth

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Can any of the company-specific risk be diversified away by investing in both Herzfeld Caribbean and Praxis Growth 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 Herzfeld Caribbean and Praxis Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Herzfeld Caribbean Basin and Praxis Growth Index, you can compare the effects of market volatilities on Herzfeld Caribbean and Praxis Growth 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 Herzfeld Caribbean with a short position of Praxis Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herzfeld Caribbean and Praxis Growth.

Diversification Opportunities for Herzfeld Caribbean and Praxis Growth

HerzfeldPraxisDiversified AwayHerzfeldPraxisDiversified Away100%
0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Herzfeld and Praxis is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Herzfeld Caribbean Basin and Praxis Growth Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Praxis Growth Index and Herzfeld Caribbean 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 Herzfeld Caribbean Basin are associated (or correlated) with Praxis Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Praxis Growth Index has no effect on the direction of Herzfeld Caribbean i.e., Herzfeld Caribbean and Praxis Growth go up and down completely randomly.

Pair Corralation between Herzfeld Caribbean and Praxis Growth

Given the investment horizon of 90 days Herzfeld Caribbean Basin is expected to generate 1.23 times more return on investment than Praxis Growth. However, Herzfeld Caribbean is 1.23 times more volatile than Praxis Growth Index. It trades about 0.15 of its potential returns per unit of risk. Praxis Growth Index is currently generating about 0.12 per unit of risk. If you would invest  231.00  in Herzfeld Caribbean Basin on September 25, 2024 and sell it today you would earn a total of  26.00  from holding Herzfeld Caribbean Basin or generate 11.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.44%
ValuesDaily Returns

Herzfeld Caribbean Basin  vs.  Praxis Growth Index

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 0510
JavaScript chart by amCharts 3.21.15CUBA MMDEX
       Timeline  
Herzfeld Caribbean Basin 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Herzfeld Caribbean Basin are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unsteady fundamental drivers, Herzfeld Caribbean may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec2.252.32.352.42.452.52.55
Praxis Growth Index 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Praxis Growth Index are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Praxis Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec4748495051

Herzfeld Caribbean and Praxis Growth Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.49-2.64-1.78-0.92-0.05820.851.772.683.594.51 0.10.20.30.4
JavaScript chart by amCharts 3.21.15CUBA MMDEX
       Returns  

Pair Trading with Herzfeld Caribbean and Praxis Growth

The main advantage of trading using opposite Herzfeld Caribbean and Praxis Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Herzfeld Caribbean position performs unexpectedly, Praxis Growth 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 Praxis Growth will offset losses from the drop in Praxis Growth's long position.
The idea behind Herzfeld Caribbean Basin and Praxis Growth Index 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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