Correlation Between Rama Steel and Praxis Home

Can any of the company-specific risk be diversified away by investing in both Rama Steel and Praxis Home 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 Rama Steel and Praxis Home into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rama Steel Tubes and Praxis Home Retail, you can compare the effects of market volatilities on Rama Steel and Praxis Home 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 Rama Steel with a short position of Praxis Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rama Steel and Praxis Home.

Diversification Opportunities for Rama Steel and Praxis Home

0.35

Correlation Coefficient

Rama Steel  Praxis Home

Weak diversification

The 3 months correlation between Rama and Praxis is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Rama Steel Tubes and Praxis Home Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Praxis Home Retail and Rama Steel 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 Rama Steel Tubes are associated (or correlated) with Praxis Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Praxis Home Retail has no effect on the direction of Rama Steel i.e., Rama Steel and Praxis Home go up and down completely randomly.

Pair Corralation between Rama Steel and Praxis Home

Assuming the 90 days trading horizon Rama Steel is expected to generate 1.51 times less return on investment than Praxis Home. In addition to that, Rama Steel is 1.66 times more volatile than Praxis Home Retail. It trades about 0.07 of its total potential returns per unit of risk. Praxis Home Retail is currently generating about 0.18 per unit of volatility. If you would invest  1,591  in Praxis Home Retail on September 2, 2024 and sell it today you would earn a total of  597.00  from holding Praxis Home Retail or generate 37.52% return on investment over 90 days.

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

Rama Steel Tubes  vs.  Praxis Home Retail

Rama Steel Tubes

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rama Steel Tubes are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Rama Steel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Praxis Home Retail

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Praxis Home Retail are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Praxis Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rama Steel and Praxis Home

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

The idea behind Rama Steel Tubes and Praxis Home Retail 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.