Correlation Between Sp 500 and Praxis Small
Can any of the company-specific risk be diversified away by investing in both Sp 500 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 Sp 500 and Praxis Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sp 500 Index and Praxis Small Cap, you can compare the effects of market volatilities on Sp 500 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 Sp 500 with a short position of Praxis Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp 500 and Praxis Small.
Diversification Opportunities for Sp 500 and Praxis Small
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between SPFIX and Praxis is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Sp 500 Index 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 Sp 500 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 Sp 500 Index 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 Sp 500 i.e., Sp 500 and Praxis Small go up and down completely randomly.
Pair Corralation between Sp 500 and Praxis Small
Assuming the 90 days horizon Sp 500 is expected to generate 1.75 times less return on investment than Praxis Small. But when comparing it to its historical volatility, Sp 500 Index is 1.21 times less risky than Praxis Small. It trades about 0.05 of its potential returns per unit of risk. Praxis Small Cap is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 898.00 in Praxis Small Cap on September 12, 2024 and sell it today you would earn a total of 253.00 from holding Praxis Small Cap or generate 28.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sp 500 Index vs. Praxis Small Cap
Performance |
| Timeline |
| Sp 500 Index |
| Praxis Small Cap |
Sp 500 and Praxis Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sp 500 and Praxis Small
The main advantage of trading using opposite Sp 500 and Praxis Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp 500 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.| Sp 500 vs. Sp Midcap Index | Sp 500 vs. Sp Smallcap Index | Sp 500 vs. Deutsche Equity 500 | Sp 500 vs. Dreyfus Institutional Sp |
| Praxis Small vs. Sp Midcap Index | Praxis Small vs. Sp 500 Index | Praxis Small vs. Nasdaq 100 Index Fund | Praxis Small vs. Deutsche Sp 500 |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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