Correlation Between Kensington Dynamic and Praxis Growth

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

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

Diversification Opportunities for Kensington Dynamic and Praxis Growth

0.94

Correlation Coefficient

Kensington Dynamic  Praxis Growth

Almost no diversification

The 3 months correlation between Kensington and Praxis is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Kensington Dynamic Growth 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 Kensington Dynamic 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 Kensington Dynamic Growth 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 Kensington Dynamic i.e., Kensington Dynamic and Praxis Growth go up and down completely randomly.

Pair Corralation between Kensington Dynamic and Praxis Growth

Assuming the 90 days horizon Kensington Dynamic Growth is expected to generate 0.75 times more return on investment than Praxis Growth. However, Kensington Dynamic Growth is 1.34 times less risky than Praxis Growth. It trades about 0.16 of its potential returns per unit of risk. Praxis Growth Index is currently generating about 0.1 per unit of risk. If you would invest  1,064  in Kensington Dynamic Growth on September 21, 2024 and sell it today you would earn a total of  77.00  from holding Kensington Dynamic Growth or generate 7.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Kensington Dynamic Growth  vs.  Praxis Growth Index

Kensington Dynamic Growth

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kensington Dynamic Growth are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Kensington Dynamic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Praxis Growth Index

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Praxis Growth Index are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Praxis Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kensington Dynamic and Praxis Growth

The main advantage of trading using opposite Kensington Dynamic and Praxis Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kensington Dynamic 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 Kensington Dynamic Growth 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.