Correlation Between Praxis Home and Megastar Foods

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

Diversification Opportunities for Praxis Home and Megastar Foods

-0.6

Correlation Coefficient

Praxis Home  Megastar Foods

Excellent diversification

The 3 months correlation between Praxis and Megastar is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Home Retail and Megastar Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Megastar Foods 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 Megastar Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Megastar Foods has no effect on the direction of Praxis Home i.e., Praxis Home and Megastar Foods go up and down completely randomly.

Pair Corralation between Praxis Home and Megastar Foods

Assuming the 90 days trading horizon Praxis Home Retail is expected to generate 1.19 times more return on investment than Megastar Foods. However, Praxis Home is 1.19 times more volatile than Megastar Foods Limited. It trades about 0.2 of its potential returns per unit of risk. Megastar Foods Limited is currently generating about -0.2 per unit of risk. If you would invest  1,591  in Praxis Home Retail on August 31, 2024 and sell it today you would earn a total of  651.00  from holding Praxis Home Retail or generate 40.92% return on investment over 90 days.

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

Praxis Home Retail  vs.  Megastar Foods Limited

Praxis Home Retail

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Praxis Home Retail are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Praxis Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Megastar Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Megastar Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Praxis Home and Megastar Foods

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

The idea behind Praxis Home Retail and Megastar Foods 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.