Correlation Between Avantis Small and Praxis Growth
Can any of the company-specific risk be diversified away by investing in both Avantis Small and Praxis Growth 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 Avantis Small and Praxis Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avantis Small Cap and Praxis Growth Index, you can compare the effects of market volatilities on Avantis Small and Praxis Growth 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 Avantis Small with a short position of Praxis Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avantis Small and Praxis Growth.
Diversification Opportunities for Avantis Small and Praxis Growth
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Avantis and Praxis is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Small Cap and Praxis Growth Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Praxis Growth Index and Avantis Small 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 Avantis Small Cap are associated (or correlated) with Praxis Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Praxis Growth Index has no effect on the direction of Avantis Small i.e., Avantis Small and Praxis Growth go up and down completely randomly.
Pair Corralation between Avantis Small and Praxis Growth
Assuming the 90 days horizon Avantis Small Cap is expected to under-perform the Praxis Growth. In addition to that, Avantis Small is 1.64 times more volatile than Praxis Growth Index. It trades about -0.12 of its total potential returns per unit of risk. Praxis Growth Index is currently generating about 0.2 per unit of volatility. If you would invest 4,979 in Praxis Growth Index on September 13, 2024 and sell it today you would earn a total of 174.00 from holding Praxis Growth Index or generate 3.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avantis Small Cap vs. Praxis Growth Index
Performance |
| Timeline |
| Avantis Small Cap |
| Praxis Growth Index |
Avantis Small and Praxis Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avantis Small and Praxis Growth
The main advantage of trading using opposite Avantis Small and Praxis Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantis Small position performs unexpectedly, Praxis Growth 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 Growth will offset losses from the drop in Praxis Growth's long position.| Avantis Small vs. Invesco Global Health | Avantis Small vs. Alger Health Sciences | Avantis Small vs. Live Oak Health | Avantis Small vs. Highland Longshort Healthcare |
| Praxis Growth vs. Precious Metals And | Praxis Growth vs. Oppenheimer Gold Special | Praxis Growth vs. Gold And Precious | Praxis Growth vs. Europac Gold Fund |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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