Correlation Between Blue Coast and Praxis Home

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

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

Diversification Opportunities for Blue Coast and Praxis Home

-0.88

Correlation Coefficient

Blue Coast  Praxis Home

Pay attention - limited upside

The 3 months correlation between Blue and Praxis is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Blue Coast Hotels 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 Blue Coast 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 Blue Coast Hotels 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 Blue Coast i.e., Blue Coast and Praxis Home go up and down completely randomly.

Pair Corralation between Blue Coast and Praxis Home

Assuming the 90 days trading horizon Blue Coast Hotels is expected to generate 1.08 times more return on investment than Praxis Home. However, Blue Coast is 1.08 times more volatile than Praxis Home Retail. It trades about 0.8 of its potential returns per unit of risk. Praxis Home Retail is currently generating about -0.23 per unit of risk. If you would invest  998.00  in Blue Coast Hotels on November 29, 2024 and sell it today you would earn a total of  3,229  from holding Blue Coast Hotels or generate 323.55% return on investment over 90 days.

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

Blue Coast Hotels  vs.  Praxis Home Retail

Blue Coast Hotels

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Coast Hotels are ranked lower than 63 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Blue Coast sustained solid returns over the last few months and may actually be approaching a breakup point.

Praxis Home Retail

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Blue Coast and Praxis Home

The main advantage of trading using opposite Blue Coast and Praxis Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Coast 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 Blue Coast Hotels 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.