Correlation Between Praxis Small and Praxis Growth
Can any of the company-specific risk be diversified away by investing in both Praxis Small and Praxis Growth 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 Small and Praxis Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Praxis Small Cap and Praxis Growth Index, you can compare the effects of market volatilities on Praxis Small and Praxis Growth 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 Small with a short position of Praxis Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Praxis Small and Praxis Growth.
Diversification Opportunities for Praxis Small and Praxis Growth
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Praxis and Praxis is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Small Cap and Praxis Growth Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Praxis Growth Index and Praxis Small 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 Small Cap are associated (or correlated) with Praxis Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Praxis Growth Index has no effect on the direction of Praxis Small i.e., Praxis Small and Praxis Growth go up and down completely randomly.
Pair Corralation between Praxis Small and Praxis Growth
Assuming the 90 days horizon Praxis Small Cap is expected to generate 0.79 times more return on investment than Praxis Growth. However, Praxis Small Cap is 1.27 times less risky than Praxis Growth. It trades about -0.12 of its potential returns per unit of risk. Praxis Growth Index is currently generating about -0.13 per unit of risk. If you would invest 1,070 in Praxis Small Cap on December 28, 2024 and sell it today you would lose (85.00) from holding Praxis Small Cap or give up 7.94% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Praxis Small Cap vs. Praxis Growth Index
Performance |
Timeline |
Praxis Small Cap |
Praxis Growth Index |
Praxis Small and Praxis Growth Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Praxis Small and Praxis Growth
The main advantage of trading using opposite Praxis Small and Praxis Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Praxis Small position performs unexpectedly, Praxis Growth 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 Growth will offset losses from the drop in Praxis Growth's long position.Praxis Small vs. Materials Portfolio Fidelity | Praxis Small vs. Fa 529 Aggressive | Praxis Small vs. Aam Select Income | Praxis Small vs. Arrow Managed Futures |
Praxis Growth vs. Praxis Genesis Balanced | Praxis Growth vs. Praxis Genesis Servative | Praxis Growth vs. Praxis Value Index | Praxis Growth vs. Praxis Value Index |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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