Correlation Between Praxis Home and MIRC Electronics

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

Diversification Opportunities for Praxis Home and MIRC Electronics

0.17

Correlation Coefficient

Praxis Home  MIRC Electronics

Average diversification

The 3 months correlation between Praxis and MIRC is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Home Retail and MIRC Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MIRC Electronics 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 MIRC Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MIRC Electronics has no effect on the direction of Praxis Home i.e., Praxis Home and MIRC Electronics go up and down completely randomly.

Pair Corralation between Praxis Home and MIRC Electronics

Assuming the 90 days trading horizon Praxis Home Retail is expected to under-perform the MIRC Electronics. In addition to that, Praxis Home is 1.0 times more volatile than MIRC Electronics Limited. It trades about -0.08 of its total potential returns per unit of risk. MIRC Electronics Limited is currently generating about -0.03 per unit of volatility. If you would invest  2,539  in MIRC Electronics Limited on September 20, 2024 and sell it today you would lose (171.00) from holding MIRC Electronics Limited or give up 6.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Praxis Home Retail  vs.  MIRC Electronics Limited

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.

MIRC Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MIRC Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, MIRC Electronics is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Praxis Home and MIRC Electronics

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

The idea behind Praxis Home Retail and MIRC Electronics 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 Valuation module to check real value of public entities based on technical and fundamental data.