Correlation Between Calvert Small and Parnassus Mid

Can any of the company-specific risk be diversified away by investing in both Calvert Small and Parnassus Mid 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 Calvert Small and Parnassus Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Calvert Small Cap and Parnassus Mid Cap, you can compare the effects of market volatilities on Calvert Small and Parnassus Mid 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 Calvert Small with a short position of Parnassus Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calvert Small and Parnassus Mid.

Diversification Opportunities for Calvert Small and Parnassus Mid

0.78

Correlation Coefficient

Calvert Small  Parnassus Mid

Poor diversification

The 3 months correlation between Calvert and Parnassus is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Small Cap and Parnassus Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parnassus Mid Cap and Calvert 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 Calvert Small Cap are associated (or correlated) with Parnassus Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parnassus Mid Cap has no effect on the direction of Calvert Small i.e., Calvert Small and Parnassus Mid go up and down completely randomly.

Pair Corralation between Calvert Small and Parnassus Mid

Assuming the 90 days horizon Calvert Small Cap is expected to generate 1.16 times more return on investment than Parnassus Mid. However, Calvert Small is 1.16 times more volatile than Parnassus Mid Cap. It trades about 0.16 of its potential returns per unit of risk. Parnassus Mid Cap is currently generating about 0.01 per unit of risk. If you would invest  3,255  in Calvert Small Cap on September 12, 2024 and sell it today you would earn a total of  356.00  from holding Calvert Small Cap or generate 10.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Calvert Small Cap  vs.  Parnassus Mid Cap

Calvert Small Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Calvert Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Parnassus Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Parnassus Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Parnassus Mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Calvert Small and Parnassus Mid

The main advantage of trading using opposite Calvert Small and Parnassus Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Calvert Small position performs unexpectedly, Parnassus Mid 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 Parnassus Mid will offset losses from the drop in Parnassus Mid's long position.

The idea behind Calvert Small Cap and Parnassus Mid Cap 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.