Correlation Between Praxis Home and Sapphire Foods

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

Diversification Opportunities for Praxis Home and Sapphire Foods

0.31

Correlation Coefficient

Praxis Home  Sapphire Foods

Weak diversification

The 3 months correlation between Praxis and Sapphire is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Home Retail and Sapphire Foods India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sapphire Foods 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 Sapphire Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sapphire Foods India has no effect on the direction of Praxis Home i.e., Praxis Home and Sapphire Foods go up and down completely randomly.

Pair Corralation between Praxis Home and Sapphire Foods

Assuming the 90 days trading horizon Praxis Home Retail is expected to generate 1.38 times more return on investment than Sapphire Foods. However, Praxis Home is 1.38 times more volatile than Sapphire Foods India. It trades about 0.2 of its potential returns per unit of risk. Sapphire Foods India is currently generating about 0.0 per unit of risk. If you would invest  1,591  in Praxis Home Retail on August 31, 2024 and sell it today you would earn a total of  651.00  from holding Praxis Home Retail or generate 40.92% 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.  Sapphire Foods India

Praxis Home Retail

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Praxis Home Retail are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Praxis Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Sapphire Foods India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapphire Foods India has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Sapphire Foods is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Praxis Home and Sapphire Foods

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

The idea behind Praxis Home Retail and Sapphire Foods 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.