Correlation Between Praxis Genesis and Praxis Small
Can any of the company-specific risk be diversified away by investing in both Praxis Genesis and Praxis Small 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 Praxis Genesis and Praxis Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Praxis Genesis Balanced and Praxis Small Cap, you can compare the effects of market volatilities on Praxis Genesis and Praxis Small 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 Praxis Genesis with a short position of Praxis Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Praxis Genesis and Praxis Small.
Diversification Opportunities for Praxis Genesis and Praxis Small
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Praxis and Praxis is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Genesis Balanced and Praxis Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Praxis Small Cap and Praxis Genesis 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 Praxis Genesis Balanced are associated (or correlated) with Praxis Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Praxis Small Cap has no effect on the direction of Praxis Genesis i.e., Praxis Genesis and Praxis Small go up and down completely randomly.
Pair Corralation between Praxis Genesis and Praxis Small
Assuming the 90 days horizon Praxis Genesis is expected to generate 1.88 times less return on investment than Praxis Small. But when comparing it to its historical volatility, Praxis Genesis Balanced is 1.6 times less risky than Praxis Small. It trades about 0.13 of its potential returns per unit of risk. Praxis Small Cap is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,073 in Praxis Small Cap on October 20, 2024 and sell it today you would earn a total of 26.00 from holding Praxis Small Cap or generate 2.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Praxis Genesis Balanced vs. Praxis Small Cap
Performance |
| Timeline |
| Praxis Genesis Balanced |
| Praxis Small Cap |
Praxis Genesis and Praxis Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Praxis Genesis and Praxis Small
The main advantage of trading using opposite Praxis Genesis and Praxis Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Praxis Genesis position performs unexpectedly, Praxis Small 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 Small will offset losses from the drop in Praxis Small's long position.| Praxis Genesis vs. Praxis Growth Index | Praxis Genesis vs. Praxis Small Cap | Praxis Genesis vs. Praxis Small Cap | Praxis Genesis vs. Praxis International Index |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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