Correlation Between Edgewood Growth and Parnassus Mid

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

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

Diversification Opportunities for Edgewood Growth and Parnassus Mid

0.74

Correlation Coefficient

Edgewood Growth  Parnassus Mid

Poor diversification

The 3 months correlation between Edgewood and Parnassus is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Edgewood Growth Fund 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 Edgewood Growth 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 Edgewood Growth Fund 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 Edgewood Growth i.e., Edgewood Growth and Parnassus Mid go up and down completely randomly.

Pair Corralation between Edgewood Growth and Parnassus Mid

Assuming the 90 days horizon Edgewood Growth Fund is expected to generate 1.56 times more return on investment than Parnassus Mid. However, Edgewood Growth is 1.56 times more volatile than Parnassus Mid Cap. It trades about 0.05 of its potential returns per unit of risk. Parnassus Mid Cap is currently generating about 0.03 per unit of risk. If you would invest  2,959  in Edgewood Growth Fund on September 25, 2024 and sell it today you would earn a total of  1,127  from holding Edgewood Growth Fund or generate 38.09% return on investment over 90 days.

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

Edgewood Growth Fund  vs.  Parnassus Mid Cap

Edgewood Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edgewood Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

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 latest weak performance, the Fund's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Edgewood Growth and Parnassus Mid

The main advantage of trading using opposite Edgewood Growth and Parnassus Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edgewood Growth 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 Edgewood Growth Fund 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.