Correlation Between Visa and Praxis Home

Can any of the company-specific risk be diversified away by investing in both Visa and Praxis Home 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 Visa and Praxis Home into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Visa Class A and Praxis Home Retail, you can compare the effects of market volatilities on Visa and Praxis Home 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 Visa with a short position of Praxis Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Praxis Home.

Diversification Opportunities for Visa and Praxis Home

0.08

Correlation Coefficient

Visa  Praxis Home

Significant diversification

The 3 months correlation between Visa and Praxis is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Praxis Home Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Praxis Home Retail and Visa 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 Visa Class A are associated (or correlated) with Praxis Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Praxis Home Retail has no effect on the direction of Visa i.e., Visa and Praxis Home go up and down completely randomly.

Pair Corralation between Visa and Praxis Home

Taking into account the 90-day investment horizon Visa is expected to generate 2.83 times less return on investment than Praxis Home. But when comparing it to its historical volatility, Visa Class A is 2.39 times less risky than Praxis Home. It trades about 0.17 of its potential returns per unit of risk. Praxis Home Retail is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,622  in Praxis Home Retail on September 3, 2024 and sell it today you would earn a total of  673.00  from holding Praxis Home Retail or generate 41.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Visa Class A  vs.  Praxis Home Retail

Visa Class A

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

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 conflicting basic indicators, Praxis Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Praxis Home

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

The idea behind Visa Class A and Praxis Home Retail 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.