Correlation Between Praxis Value and Goldman Sachs

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

By analyzing existing cross correlation between Praxis Value Index and Goldman Sachs Real, you can compare the effects of market volatilities on Praxis Value and Goldman Sachs 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 Value with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Praxis Value and Goldman Sachs.

Diversification Opportunities for Praxis Value and Goldman Sachs

0.95

Correlation Coefficient

Praxis Value  Goldman Sachs

Almost no diversification

The 3 months correlation between Praxis and Goldman is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Value Index and Goldman Sachs Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Real and Praxis Value 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 Value Index are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Real has no effect on the direction of Praxis Value i.e., Praxis Value and Goldman Sachs go up and down completely randomly.

Pair Corralation between Praxis Value and Goldman Sachs

Assuming the 90 days horizon Praxis Value Index is expected to generate 0.63 times more return on investment than Goldman Sachs. However, Praxis Value Index is 1.6 times less risky than Goldman Sachs. It trades about 0.29 of its potential returns per unit of risk. Goldman Sachs Real is currently generating about 0.14 per unit of risk. If you would invest  1,738  in Praxis Value Index on October 20, 2024 and sell it today you would earn a total of  70.00  from holding Praxis Value Index or generate 4.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Praxis Value Index  vs.  Goldman Sachs Real

Praxis Value Index

Risk-Adjusted Performance

0 of 100

Very Weak

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

Goldman Sachs Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Real has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Praxis Value and Goldman Sachs

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

The idea behind Praxis Value Index and Goldman Sachs Real 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.