Correlation Between Praxis Home and Nippon Life

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

Diversification Opportunities for Praxis Home and Nippon Life

-0.45

Correlation Coefficient

Praxis Home  Nippon Life

Very good diversification

The 3 months correlation between Praxis and Nippon is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Home Retail and Nippon Life India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Life India 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 Nippon Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Life India has no effect on the direction of Praxis Home i.e., Praxis Home and Nippon Life go up and down completely randomly.

Pair Corralation between Praxis Home and Nippon Life

Assuming the 90 days trading horizon Praxis Home Retail is expected to generate 1.19 times more return on investment than Nippon Life. However, Praxis Home is 1.19 times more volatile than Nippon Life India. It trades about 0.02 of its potential returns per unit of risk. Nippon Life India is currently generating about -0.16 per unit of risk. If you would invest  1,984  in Praxis Home Retail on October 20, 2024 and sell it today you would earn a total of  7.00  from holding Praxis Home Retail or generate 0.35% return on investment over 90 days.

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

Praxis Home Retail  vs.  Nippon Life India

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.

Nippon Life India

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Praxis Home and Nippon Life

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

The idea behind Praxis Home Retail and Nippon Life India 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.