Correlation Between Praxis Small and The Arbitrage
Can any of the company-specific risk be diversified away by investing in both Praxis Small and The Arbitrage 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 The Arbitrage 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 The Arbitrage Event Driven, you can compare the effects of market volatilities on Praxis Small and The Arbitrage 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 The Arbitrage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Praxis Small and The Arbitrage.
Diversification Opportunities for Praxis Small and The Arbitrage
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Praxis and THE is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Small Cap and The Arbitrage Event Driven in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbitrage Event 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 The Arbitrage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbitrage Event has no effect on the direction of Praxis Small i.e., Praxis Small and The Arbitrage go up and down completely randomly.
Pair Corralation between Praxis Small and The Arbitrage
Assuming the 90 days horizon Praxis Small Cap is expected to generate 8.74 times more return on investment than The Arbitrage. However, Praxis Small is 8.74 times more volatile than The Arbitrage Event Driven. It trades about 0.18 of its potential returns per unit of risk. The Arbitrage Event Driven is currently generating about 0.5 per unit of risk. If you would invest 1,054 in Praxis Small Cap on May 1, 2025 and sell it today you would earn a total of 34.00 from holding Praxis Small Cap or generate 3.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Praxis Small Cap vs. The Arbitrage Event Driven
Performance |
| Timeline |
| Praxis Small Cap |
| Arbitrage Event |
Praxis Small and The Arbitrage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Praxis Small and The Arbitrage
The main advantage of trading using opposite Praxis Small and The Arbitrage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Praxis Small position performs unexpectedly, The Arbitrage 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 The Arbitrage will offset losses from the drop in The Arbitrage's long position.| Praxis Small vs. Sp Smallcap 600 | Praxis Small vs. Smallcap Fund Fka | Praxis Small vs. Needham Small Cap | Praxis Small vs. Federated Mdt Small |
| The Arbitrage vs. Elfun Diversified Fund | The Arbitrage vs. Stone Ridge Diversified | The Arbitrage vs. Schwab Small Cap Index | The Arbitrage vs. Aqr Diversified Arbitrage |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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