Correlation Between Global Gold and Praxis Small

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

By analyzing existing cross correlation between Global Gold Fund and Praxis Small Cap, you can compare the effects of market volatilities on Global Gold and Praxis Small 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 Global Gold with a short position of Praxis Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Gold and Praxis Small.

Diversification Opportunities for Global Gold and Praxis Small

-0.22

Correlation Coefficient

Global Gold  Praxis Small

Very good diversification

The 3 months correlation between Global and Praxis is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Global Gold Fund and Praxis Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Praxis Small Cap and Global Gold 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 Global Gold Fund are associated (or correlated) with Praxis Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Praxis Small Cap has no effect on the direction of Global Gold i.e., Global Gold and Praxis Small go up and down completely randomly.

Pair Corralation between Global Gold and Praxis Small

Assuming the 90 days horizon Global Gold Fund is expected to generate 1.48 times more return on investment than Praxis Small. However, Global Gold is 1.48 times more volatile than Praxis Small Cap. It trades about 0.29 of its potential returns per unit of risk. Praxis Small Cap is currently generating about -0.11 per unit of risk. If you would invest  1,186  in Global Gold Fund on December 21, 2024 and sell it today you would earn a total of  367.00  from holding Global Gold Fund or generate 30.94% return on investment over 90 days.

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

Global Gold Fund  vs.  Praxis Small Cap

Global Gold Fund

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Gold Fund are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Global Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Praxis Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Praxis Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Global Gold and Praxis Small

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

The idea behind Global Gold Fund and Praxis Small Cap 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.