Correlation Between Praxis Home and Jindal Stainless

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

Diversification Opportunities for Praxis Home and Jindal Stainless

0.08

Correlation Coefficient

Praxis Home  Jindal Stainless

Significant diversification

The 3 months correlation between Praxis and Jindal is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Home Retail and Jindal Stainless Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jindal Stainless 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 Jindal Stainless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jindal Stainless has no effect on the direction of Praxis Home i.e., Praxis Home and Jindal Stainless go up and down completely randomly.

Pair Corralation between Praxis Home and Jindal Stainless

Assuming the 90 days trading horizon Praxis Home Retail is expected to under-perform the Jindal Stainless. In addition to that, Praxis Home is 1.62 times more volatile than Jindal Stainless Limited. It trades about -0.07 of its total potential returns per unit of risk. Jindal Stainless Limited is currently generating about -0.1 per unit of volatility. If you would invest  70,240  in Jindal Stainless Limited on October 10, 2024 and sell it today you would lose (5,695) from holding Jindal Stainless Limited or give up 8.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

Praxis Home Retail  vs.  Jindal Stainless Limited

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 somewhat strong basic indicators, Praxis Home is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Jindal Stainless

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jindal Stainless Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Praxis Home and Jindal Stainless

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

The idea behind Praxis Home Retail and Jindal Stainless Limited 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.