Correlation Between Praxis Home and SIL Investments

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

Diversification Opportunities for Praxis Home and SIL Investments

0.33

Correlation Coefficient

Praxis Home  SIL Investments

Weak diversification

The 3 months correlation between Praxis and SIL is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Home Retail and SIL Investments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIL Investments 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 SIL Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIL Investments has no effect on the direction of Praxis Home i.e., Praxis Home and SIL Investments go up and down completely randomly.

Pair Corralation between Praxis Home and SIL Investments

Assuming the 90 days trading horizon Praxis Home Retail is expected to under-perform the SIL Investments. In addition to that, Praxis Home is 1.46 times more volatile than SIL Investments Limited. It trades about -0.14 of its total potential returns per unit of risk. SIL Investments Limited is currently generating about -0.16 per unit of volatility. If you would invest  69,815  in SIL Investments Limited on October 26, 2024 and sell it today you would lose (8,710) from holding SIL Investments Limited or give up 12.48% of portfolio value over 90 days.

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

Praxis Home Retail  vs.  SIL Investments 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 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.

SIL Investments

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SIL Investments Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, SIL Investments is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Praxis Home and SIL Investments

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

The idea behind Praxis Home Retail and SIL Investments 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.