Correlation Between Praxis Growth and Payden Absolute

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

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

Diversification Opportunities for Praxis Growth and Payden Absolute

0.51

Correlation Coefficient

Praxis Growth  Payden Absolute

Very weak diversification

The 3 months correlation between Praxis and Payden is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Growth Index and Payden Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Absolute Return and Praxis Growth 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 Praxis Growth Index are associated (or correlated) with Payden Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Absolute Return has no effect on the direction of Praxis Growth i.e., Praxis Growth and Payden Absolute go up and down completely randomly.

Pair Corralation between Praxis Growth and Payden Absolute

Assuming the 90 days horizon Praxis Growth Index is expected to generate 6.83 times more return on investment than Payden Absolute. However, Praxis Growth is 6.83 times more volatile than Payden Absolute Return. It trades about 0.19 of its potential returns per unit of risk. Payden Absolute Return is currently generating about 0.1 per unit of risk. If you would invest  4,607  in Praxis Growth Index on September 15, 2024 and sell it today you would earn a total of  526.00  from holding Praxis Growth Index or generate 11.42% return on investment over 90 days.

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

Praxis Growth Index  vs.  Payden Absolute Return

Praxis Growth Index

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Praxis Growth Index are ranked lower than 15 (%) 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.

Payden Absolute Return

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Praxis Growth and Payden Absolute

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

The idea behind Praxis Growth Index and Payden Absolute Return 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.