Correlation Between Praxis Growth and Small Cap
Can any of the company-specific risk be diversified away by investing in both Praxis Growth and Small Cap 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 Growth and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Praxis Growth Index and Small Cap Stock, you can compare the effects of market volatilities on Praxis Growth and Small Cap 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 Growth with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Praxis Growth and Small Cap.
Diversification Opportunities for Praxis Growth and Small Cap
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Praxis and Small is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Growth Index and Small Cap Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Stock and Praxis Growth 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 Growth Index are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Stock has no effect on the direction of Praxis Growth i.e., Praxis Growth and Small Cap go up and down completely randomly.
Pair Corralation between Praxis Growth and Small Cap
Assuming the 90 days horizon Praxis Growth is expected to generate 7.59 times less return on investment than Small Cap. But when comparing it to its historical volatility, Praxis Growth Index is 1.52 times less risky than Small Cap. It trades about 0.05 of its potential returns per unit of risk. Small Cap Stock is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,416 in Small Cap Stock on August 30, 2024 and sell it today you would earn a total of 122.00 from holding Small Cap Stock or generate 8.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Praxis Growth Index vs. Small Cap Stock
Performance |
| Timeline |
| Praxis Growth Index |
| Small Cap Stock |
Praxis Growth and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Praxis Growth and Small Cap
The main advantage of trading using opposite Praxis Growth and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Praxis Growth position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Praxis Growth vs. Lifestyle Ii Moderate | Praxis Growth vs. Target Retirement 2040 | Praxis Growth vs. Franklin Lifesmart Retirement | Praxis Growth vs. Moderately Aggressive Balanced |
| Small Cap vs. Franklin Adjustable Government | Small Cap vs. Dreyfus Government Cash | Small Cap vs. Lord Abbett Government | Small Cap vs. Inverse Government Long |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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