Correlation Between GM Breweries and Praxis Home

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

By analyzing existing cross correlation between GM Breweries Limited and Praxis Home Retail, you can compare the effects of market volatilities on GM Breweries and Praxis Home 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 GM Breweries with a short position of Praxis Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM Breweries and Praxis Home.

Diversification Opportunities for GM Breweries and Praxis Home

-0.04

Correlation Coefficient

GM Breweries  Praxis Home

Good diversification

The 3 months correlation between GMBREW and Praxis is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and Praxis Home Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Praxis Home Retail and GM Breweries 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 GM Breweries Limited are associated (or correlated) with Praxis Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Praxis Home Retail has no effect on the direction of GM Breweries i.e., GM Breweries and Praxis Home go up and down completely randomly.

Pair Corralation between GM Breweries and Praxis Home

Assuming the 90 days trading horizon GM Breweries Limited is expected to generate 0.86 times more return on investment than Praxis Home. However, GM Breweries Limited is 1.16 times less risky than Praxis Home. It trades about -0.05 of its potential returns per unit of risk. Praxis Home Retail is currently generating about -0.09 per unit of risk. If you would invest  87,945  in GM Breweries Limited on September 4, 2024 and sell it today you would lose (5,380) from holding GM Breweries Limited or give up 6.12% of portfolio value over 90 days.

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

GM Breweries Limited  vs.  Praxis Home Retail

GM Breweries Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GM Breweries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GM Breweries is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Praxis Home Retail

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Praxis Home Retail are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Praxis Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM Breweries and Praxis Home

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

The idea behind GM Breweries Limited and Praxis Home Retail 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.