Correlation Between Praxis Home and Tata Investment

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Can any of the company-specific risk be diversified away by investing in both Praxis Home and Tata Investment 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 Home and Tata Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Praxis Home Retail and Tata Investment, you can compare the effects of market volatilities on Praxis Home and Tata Investment 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 Home with a short position of Tata Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Praxis Home and Tata Investment.

Diversification Opportunities for Praxis Home and Tata Investment

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between Praxis and Tata is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Home Retail and Tata Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Investment and Praxis Home 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 Home Retail are associated (or correlated) with Tata Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Investment has no effect on the direction of Praxis Home i.e., Praxis Home and Tata Investment go up and down completely randomly.

Pair Corralation between Praxis Home and Tata Investment

Assuming the 90 days trading horizon Praxis Home Retail is expected to under-perform the Tata Investment. In addition to that, Praxis Home is 1.16 times more volatile than Tata Investment. It trades about -0.01 of its total potential returns per unit of risk. Tata Investment is currently generating about 0.09 per unit of volatility. If you would invest  196,301  in Tata Investment on November 27, 2024 and sell it today you would earn a total of  379,229  from holding Tata Investment or generate 193.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.87%
ValuesDaily Returns

Praxis Home Retail  vs.  Tata Investment

 Performance 
       Timeline  
Praxis Home Retail 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Praxis Home Retail has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Tata Investment 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Tata Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in March 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Praxis Home and Tata Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Praxis Home and Tata Investment

The main advantage of trading using opposite Praxis Home and Tata Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Praxis Home position performs unexpectedly, Tata Investment 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 Tata Investment will offset losses from the drop in Tata Investment's long position.
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The idea behind Praxis Home Retail and Tata Investment 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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