Correlation Between Praxis Small and Transamerica International
Can any of the company-specific risk be diversified away by investing in both Praxis Small and Transamerica International 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 Small and Transamerica International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Praxis Small Cap and Transamerica International Growth, you can compare the effects of market volatilities on Praxis Small and Transamerica International 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 Small with a short position of Transamerica International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Praxis Small and Transamerica International.
Diversification Opportunities for Praxis Small and Transamerica International
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PRAXIS and Transamerica is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Small Cap and Transamerica International Gro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica International and Praxis 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 Praxis Small Cap are associated (or correlated) with Transamerica International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica International has no effect on the direction of Praxis Small i.e., Praxis Small and Transamerica International go up and down completely randomly.
Pair Corralation between Praxis Small and Transamerica International
Assuming the 90 days horizon Praxis Small Cap is expected to generate 1.14 times more return on investment than Transamerica International. However, Praxis Small is 1.14 times more volatile than Transamerica International Growth. It trades about 0.03 of its potential returns per unit of risk. Transamerica International Growth is currently generating about -0.02 per unit of risk. If you would invest 953.00 in Praxis Small Cap on October 27, 2024 and sell it today you would earn a total of 163.00 from holding Praxis Small Cap or generate 17.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Praxis Small Cap vs. Transamerica International Gro
Performance |
| Timeline |
| Praxis Small Cap |
| Transamerica International |
Praxis Small and Transamerica International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Praxis Small and Transamerica International
The main advantage of trading using opposite Praxis Small and Transamerica International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Praxis Small position performs unexpectedly, Transamerica International 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 Transamerica International will offset losses from the drop in Transamerica International's long position.| Praxis Small vs. Franklin Emerging Market | Praxis Small vs. Dreyfus Bond Market | Praxis Small vs. Calvert Developed Market | Praxis Small vs. Western Asset Diversified |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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