Correlation Between Tera Software and Praxis Home

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

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

Diversification Opportunities for Tera Software and Praxis Home

-0.86

Correlation Coefficient

Tera Software  Praxis Home

Pay attention - limited upside

The 3 months correlation between Tera and Praxis is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Tera Software Limited 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 Tera Software 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 Tera Software Limited 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 Tera Software i.e., Tera Software and Praxis Home go up and down completely randomly.

Pair Corralation between Tera Software and Praxis Home

Assuming the 90 days trading horizon Tera Software is expected to generate 1.29 times less return on investment than Praxis Home. But when comparing it to its historical volatility, Tera Software Limited is 1.46 times less risky than Praxis Home. It trades about 0.05 of its potential returns per unit of risk. Praxis Home Retail is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,140  in Praxis Home Retail on October 10, 2024 and sell it today you would earn a total of  42.00  from holding Praxis Home Retail or generate 1.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Tera Software Limited  vs.  Praxis Home Retail

Tera Software Limited

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tera Software Limited are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Tera Software reported solid returns over the last few months and may actually be approaching a breakup point.

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 latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Tera Software and Praxis Home

The main advantage of trading using opposite Tera Software and Praxis Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tera Software 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 Tera Software Limited 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.