Correlation Between Piramal Enterprises and Praxis Home

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

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

Diversification Opportunities for Piramal Enterprises and Praxis Home

0.69

Correlation Coefficient

Piramal Enterprises  Praxis Home

Poor diversification

The 3 months correlation between Piramal and Praxis is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Piramal Enterprises Limited 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 Piramal Enterprises 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 Piramal Enterprises Limited 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 Piramal Enterprises i.e., Piramal Enterprises and Praxis Home go up and down completely randomly.

Pair Corralation between Piramal Enterprises and Praxis Home

Assuming the 90 days trading horizon Piramal Enterprises Limited is expected to generate 0.89 times more return on investment than Praxis Home. However, Piramal Enterprises Limited is 1.12 times less risky than Praxis Home. It trades about -0.03 of its potential returns per unit of risk. Praxis Home Retail is currently generating about -0.33 per unit of risk. If you would invest  109,055  in Piramal Enterprises Limited on December 25, 2024 and sell it today you would lose (6,770) from holding Piramal Enterprises Limited or give up 6.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Piramal Enterprises Limited  vs.  Praxis Home Retail

Piramal Enterprises

Risk-Adjusted Performance

Very Weak

Over the last 90 days Piramal Enterprises Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Piramal Enterprises is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Piramal Enterprises and Praxis Home

The main advantage of trading using opposite Piramal Enterprises and Praxis Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Piramal Enterprises 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 Piramal Enterprises Limited 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.