Correlation Between Praxis Home and Tata InvestmentLimite

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

Diversification Opportunities for Praxis Home and Tata InvestmentLimite

0.74

Correlation Coefficient

Praxis Home  Tata InvestmentLimite

Poor diversification

The 3 months correlation between Praxis and Tata is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Home Retail and Tata Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata InvestmentLimite 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 Tata InvestmentLimite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata InvestmentLimite has no effect on the direction of Praxis Home i.e., Praxis Home and Tata InvestmentLimite go up and down completely randomly.

Pair Corralation between Praxis Home and Tata InvestmentLimite

Assuming the 90 days trading horizon Praxis Home Retail is expected to under-perform the Tata InvestmentLimite. In addition to that, Praxis Home is 1.01 times more volatile than Tata Investment. It trades about -0.25 of its total potential returns per unit of risk. Tata Investment is currently generating about -0.03 per unit of volatility. If you would invest  689,800  in Tata Investment on December 10, 2024 and sell it today you would lose (51,320) from holding Tata Investment or give up 7.44% of portfolio value over 90 days.

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

Praxis Home Retail  vs.  Tata Investment

Praxis Home Retail

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Tata InvestmentLimite

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tata Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Tata InvestmentLimite is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Praxis Home and Tata InvestmentLimite

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

The idea behind Praxis Home Retail and Tata Investment 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.