Correlation Between California Software and Praxis Home

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Can any of the company-specific risk be diversified away by investing in both California 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 California 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 California Software and Praxis Home Retail, you can compare the effects of market volatilities on California 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 California Software with a short position of Praxis Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Software and Praxis Home.

Diversification Opportunities for California Software and Praxis Home

-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between California and Praxis is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding California Software 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 California 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 California Software 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 California Software i.e., California Software and Praxis Home go up and down completely randomly.

Pair Corralation between California Software and Praxis Home

Assuming the 90 days trading horizon California Software is expected to generate 0.58 times more return on investment than Praxis Home. However, California Software is 1.74 times less risky than Praxis Home. It trades about -0.02 of its potential returns per unit of risk. Praxis Home Retail is currently generating about -0.08 per unit of risk. If you would invest  1,834  in California Software on August 29, 2024 and sell it today you would lose (23.00) from holding California Software or give up 1.25% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

California Software  vs.  Praxis Home Retail

 Performance 
       Timeline  
California Software 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days California Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Praxis Home Retail 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Praxis Home Retail are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Praxis Home sustained solid returns over the last few months and may actually be approaching a breakup point.

California Software and Praxis Home Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with California Software and Praxis Home

The main advantage of trading using opposite California Software and Praxis Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California 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.
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The idea behind California Software 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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