Correlation Between Praxis Small and Praxis International

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

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

Diversification Opportunities for Praxis Small and Praxis International

-0.36

Correlation Coefficient

Praxis Small  Praxis International

Very good diversification

The 3 months correlation between Praxis and Praxis is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Small Cap and Praxis International Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Praxis International and Praxis Small 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 Small Cap are associated (or correlated) with Praxis International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Praxis International has no effect on the direction of Praxis Small i.e., Praxis Small and Praxis International go up and down completely randomly.

Pair Corralation between Praxis Small and Praxis International

Assuming the 90 days horizon Praxis Small Cap is expected to generate 1.62 times more return on investment than Praxis International. However, Praxis Small is 1.62 times more volatile than Praxis International Index. It trades about 0.14 of its potential returns per unit of risk. Praxis International Index is currently generating about 0.0 per unit of risk. If you would invest  1,038  in Praxis Small Cap on September 12, 2024 and sell it today you would earn a total of  113.00  from holding Praxis Small Cap or generate 10.89% return on investment over 90 days.

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

Praxis Small Cap  vs.  Praxis International Index

Praxis Small Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Praxis Small Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Praxis Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Praxis International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Praxis International Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Praxis International 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 Small and Praxis International

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

The idea behind Praxis Small Cap and Praxis International 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.