Correlation Between Praxis Home and Emcure Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Praxis Home and Emcure Pharmaceuticals 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 Emcure Pharmaceuticals 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 Emcure Pharmaceuticals, you can compare the effects of market volatilities on Praxis Home and Emcure Pharmaceuticals 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 Emcure Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Praxis Home and Emcure Pharmaceuticals.

Diversification Opportunities for Praxis Home and Emcure Pharmaceuticals

0.7

Correlation Coefficient

Praxis Home  Emcure Pharmaceuticals

Poor diversification

The 3 months correlation between Praxis and Emcure is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Home Retail and Emcure Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emcure Pharmaceuticals 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 Emcure Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emcure Pharmaceuticals has no effect on the direction of Praxis Home i.e., Praxis Home and Emcure Pharmaceuticals go up and down completely randomly.

Pair Corralation between Praxis Home and Emcure Pharmaceuticals

Assuming the 90 days trading horizon Praxis Home Retail is expected to under-perform the Emcure Pharmaceuticals. In addition to that, Praxis Home is 1.24 times more volatile than Emcure Pharmaceuticals. It trades about -0.11 of its total potential returns per unit of risk. Emcure Pharmaceuticals is currently generating about -0.02 per unit of volatility. If you would invest  144,445  in Emcure Pharmaceuticals on September 23, 2024 and sell it today you would lose (5,775) from holding Emcure Pharmaceuticals or give up 4.0% of portfolio value over 90 days.

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

Praxis Home Retail  vs.  Emcure Pharmaceuticals

Praxis Home Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Praxis Home Retail has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Emcure Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Praxis Home and Emcure Pharmaceuticals

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

The idea behind Praxis Home Retail and Emcure Pharmaceuticals 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.