Correlation Between Praxis Home and Cholamandalam Investment

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

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

Diversification Opportunities for Praxis Home and Cholamandalam Investment

0.6

Correlation Coefficient

Praxis Home  Cholamandalam Investment

Poor diversification

The 3 months correlation between Praxis and Cholamandalam is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Home Retail and Cholamandalam Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cholamandalam Investment and Praxis Home 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 Home Retail are associated (or correlated) with Cholamandalam Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cholamandalam Investment has no effect on the direction of Praxis Home i.e., Praxis Home and Cholamandalam Investment go up and down completely randomly.

Pair Corralation between Praxis Home and Cholamandalam Investment

Assuming the 90 days trading horizon Praxis Home Retail is expected to under-perform the Cholamandalam Investment. In addition to that, Praxis Home is 1.04 times more volatile than Cholamandalam Investment and. It trades about -0.12 of its total potential returns per unit of risk. Cholamandalam Investment and is currently generating about 0.11 per unit of volatility. If you would invest  118,715  in Cholamandalam Investment and on October 26, 2024 and sell it today you would earn a total of  5,890  from holding Cholamandalam Investment and or generate 4.96% return on investment over 90 days.

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

Praxis Home Retail  vs.  Cholamandalam Investment and

Praxis Home Retail

Risk-Adjusted Performance

0 of 100

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

Cholamandalam Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cholamandalam Investment and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Cholamandalam Investment is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Praxis Home and Cholamandalam Investment

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

The idea behind Praxis Home Retail and Cholamandalam Investment and 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .