Correlation Between Praxis Home and Power Finance

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

Diversification Opportunities for Praxis Home and Power Finance

-0.6

Correlation Coefficient

Praxis Home  Power Finance

Excellent diversification

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

Pair Corralation between Praxis Home and Power Finance

Assuming the 90 days trading horizon Praxis Home Retail is expected to under-perform the Power Finance. In addition to that, Praxis Home is 1.14 times more volatile than Power Finance. It trades about -0.05 of its total potential returns per unit of risk. Power Finance is currently generating about 0.03 per unit of volatility. If you would invest  47,718  in Power Finance on September 19, 2024 and sell it today you would earn a total of  992.00  from holding Power Finance or generate 2.08% 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.  Power Finance

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 latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Power Finance

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Power Finance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Power Finance is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Praxis Home and Power Finance

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

The idea behind Praxis Home Retail and Power Finance 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.