Correlation Between Praxis Home and Sportking India

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

Diversification Opportunities for Praxis Home and Sportking India

0.06

Correlation Coefficient

Praxis Home  Sportking India

Significant diversification

The 3 months correlation between Praxis and Sportking is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Home Retail and Sportking India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sportking 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 Sportking India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sportking India has no effect on the direction of Praxis Home i.e., Praxis Home and Sportking India go up and down completely randomly.

Pair Corralation between Praxis Home and Sportking India

Assuming the 90 days trading horizon Praxis Home Retail is expected to under-perform the Sportking India. But the stock apears to be less risky and, when comparing its historical volatility, Praxis Home Retail is 1.16 times less risky than Sportking India. The stock trades about -0.27 of its potential returns per unit of risk. The Sportking India Limited is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  9,327  in Sportking India Limited on September 25, 2024 and sell it today you would earn a total of  2,022  from holding Sportking India Limited or generate 21.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Praxis Home Retail  vs.  Sportking India 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.

Sportking India

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Praxis Home and Sportking India

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

The idea behind Praxis Home Retail and Sportking India 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.