Correlation Between Praxis Home and Industrial Investment

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

Diversification Opportunities for Praxis Home and Industrial Investment

-0.66

Correlation Coefficient

Praxis Home  Industrial Investment

Excellent diversification

The 3 months correlation between Praxis and Industrial is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Home Retail and Industrial Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial 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 Industrial Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Investment has no effect on the direction of Praxis Home i.e., Praxis Home and Industrial Investment go up and down completely randomly.

Pair Corralation between Praxis Home and Industrial Investment

Assuming the 90 days trading horizon Praxis Home Retail is expected to under-perform the Industrial Investment. But the stock apears to be less risky and, when comparing its historical volatility, Praxis Home Retail is 1.03 times less risky than Industrial Investment. The stock trades about -0.14 of its potential returns per unit of risk. The Industrial Investment Trust is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  40,255  in Industrial Investment Trust on September 22, 2024 and sell it today you would lose (2,190) from holding Industrial Investment Trust or give up 5.44% of portfolio value over 90 days.

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

Praxis Home Retail  vs.  Industrial Investment Trust

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

Industrial Investment

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Investment Trust are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Industrial Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Praxis Home and Industrial Investment

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

The idea behind Praxis Home Retail and Industrial Investment Trust 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.