Correlation Between Praxis Home and Diligent Media

Can any of the company-specific risk be diversified away by investing in both Praxis Home and Diligent Media 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 Diligent Media 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 Diligent Media, you can compare the effects of market volatilities on Praxis Home and Diligent Media 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 Diligent Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Praxis Home and Diligent Media.

Diversification Opportunities for Praxis Home and Diligent Media

-0.3

Correlation Coefficient

Praxis Home  Diligent Media

Very good diversification

The 3 months correlation between Praxis and Diligent is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Home Retail and Diligent Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diligent Media 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 Diligent Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diligent Media has no effect on the direction of Praxis Home i.e., Praxis Home and Diligent Media go up and down completely randomly.

Pair Corralation between Praxis Home and Diligent Media

Assuming the 90 days trading horizon Praxis Home is expected to generate 1.51 times less return on investment than Diligent Media. But when comparing it to its historical volatility, Praxis Home Retail is 1.05 times less risky than Diligent Media. It trades about 0.05 of its potential returns per unit of risk. Diligent Media is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  315.00  in Diligent Media on September 12, 2024 and sell it today you would earn a total of  273.00  from holding Diligent Media or generate 86.67% return on investment over 90 days.

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

Praxis Home Retail  vs.  Diligent Media

Praxis Home Retail

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Praxis Home Retail are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Praxis Home may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Diligent Media

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Diligent Media are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Diligent Media 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 Diligent Media

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

The idea behind Praxis Home Retail and Diligent Media 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.