Correlation Between Vanguard Financials and Praxis Genesis

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

By analyzing existing cross correlation between Vanguard Financials Index and Praxis Genesis Servative, you can compare the effects of market volatilities on Vanguard Financials and Praxis Genesis 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 Vanguard Financials with a short position of Praxis Genesis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Financials and Praxis Genesis.

Diversification Opportunities for Vanguard Financials and Praxis Genesis

0.0

Correlation Coefficient

Vanguard Financials  Praxis Genesis

Pay attention - limited upside

The 3 months correlation between Vanguard and Praxis is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Financials Index and Praxis Genesis Servative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Praxis Genesis Servative and Vanguard Financials 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 Vanguard Financials Index are associated (or correlated) with Praxis Genesis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Praxis Genesis Servative has no effect on the direction of Vanguard Financials i.e., Vanguard Financials and Praxis Genesis go up and down completely randomly.

Pair Corralation between Vanguard Financials and Praxis Genesis

Assuming the 90 days horizon Vanguard Financials Index is expected to generate 2.56 times more return on investment than Praxis Genesis. However, Vanguard Financials is 2.56 times more volatile than Praxis Genesis Servative. It trades about 0.07 of its potential returns per unit of risk. Praxis Genesis Servative is currently generating about 0.04 per unit of risk. If you would invest  4,207  in Vanguard Financials Index on October 7, 2024 and sell it today you would earn a total of  1,754  from holding Vanguard Financials Index or generate 41.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Vanguard Financials Index  vs.  Praxis Genesis Servative

Vanguard Financials Index

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Financials Index are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Vanguard Financials may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Praxis Genesis Servative

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Praxis Genesis Servative has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Praxis Genesis is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Financials and Praxis Genesis

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

The idea behind Vanguard Financials Index and Praxis Genesis Servative 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.