Correlation Between Praxis Home and Prakash Steelage

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

Diversification Opportunities for Praxis Home and Prakash Steelage

0.23

Correlation Coefficient

Praxis Home  Prakash Steelage

Modest diversification

The 3 months correlation between Praxis and Prakash is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Home Retail and Prakash Steelage Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prakash Steelage 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 Prakash Steelage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prakash Steelage has no effect on the direction of Praxis Home i.e., Praxis Home and Prakash Steelage go up and down completely randomly.

Pair Corralation between Praxis Home and Prakash Steelage

Assuming the 90 days trading horizon Praxis Home Retail is expected to under-perform the Prakash Steelage. In addition to that, Praxis Home is 1.22 times more volatile than Prakash Steelage Limited. It trades about -0.21 of its total potential returns per unit of risk. Prakash Steelage Limited is currently generating about 0.01 per unit of volatility. If you would invest  803.00  in Prakash Steelage Limited on September 25, 2024 and sell it today you would earn a total of  1.00  from holding Prakash Steelage Limited or generate 0.12% return on investment over 90 days.

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

Praxis Home Retail  vs.  Prakash Steelage 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 unsteady 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.

Prakash Steelage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prakash Steelage Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Praxis Home and Prakash Steelage

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

The idea behind Praxis Home Retail and Prakash Steelage 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.