Correlation Between Praxis Home and Aarti Drugs

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

Diversification Opportunities for Praxis Home and Aarti Drugs

-0.47
  Correlation Coefficient

Very good diversification

The 3 months correlation between Praxis and Aarti is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Home Retail and Aarti Drugs Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aarti Drugs Limited and Praxis Home 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 Home Retail are associated (or correlated) with Aarti Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aarti Drugs Limited has no effect on the direction of Praxis Home i.e., Praxis Home and Aarti Drugs go up and down completely randomly.

Pair Corralation between Praxis Home and Aarti Drugs

Assuming the 90 days trading horizon Praxis Home Retail is expected to generate 3.11 times more return on investment than Aarti Drugs. However, Praxis Home is 3.11 times more volatile than Aarti Drugs Limited. It trades about 0.16 of its potential returns per unit of risk. Aarti Drugs Limited is currently generating about -0.32 per unit of risk. If you would invest  1,683  in Praxis Home Retail on September 5, 2024 and sell it today you would earn a total of  536.00  from holding Praxis Home Retail or generate 31.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Praxis Home Retail  vs.  Aarti Drugs Limited

 Performance 
       Timeline  
Praxis Home Retail 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Praxis Home Retail are ranked lower than 12 (%) 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.
Aarti Drugs Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Aarti Drugs Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Praxis Home and Aarti Drugs Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Praxis Home and Aarti Drugs

The main advantage of trading using opposite Praxis Home and Aarti Drugs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Praxis Home position performs unexpectedly, Aarti Drugs 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 Aarti Drugs will offset losses from the drop in Aarti Drugs' long position.
The idea behind Praxis Home Retail and Aarti Drugs Limited 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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