Correlation Between Fidelity Balanced and Parnassus Fund

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

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

Diversification Opportunities for Fidelity Balanced and Parnassus Fund

0.92

Correlation Coefficient

Fidelity Balanced  Parnassus Fund

Almost no diversification

The 3 months correlation between FIDELITY and Parnassus is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Balanced Fund and Parnassus Fund Inst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parnassus Fund Inst and Fidelity Balanced 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 Fidelity Balanced Fund are associated (or correlated) with Parnassus Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parnassus Fund Inst has no effect on the direction of Fidelity Balanced i.e., Fidelity Balanced and Parnassus Fund go up and down completely randomly.

Pair Corralation between Fidelity Balanced and Parnassus Fund

Assuming the 90 days horizon Fidelity Balanced Fund is expected to generate 0.57 times more return on investment than Parnassus Fund. However, Fidelity Balanced Fund is 1.76 times less risky than Parnassus Fund. It trades about -0.07 of its potential returns per unit of risk. Parnassus Fund Inst is currently generating about -0.12 per unit of risk. If you would invest  2,956  in Fidelity Balanced Fund on December 31, 2024 and sell it today you would lose (91.00) from holding Fidelity Balanced Fund or give up 3.08% of portfolio value over 90 days.

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

Fidelity Balanced Fund  vs.  Parnassus Fund Inst

Fidelity Balanced

Risk-Adjusted Performance

Very Weak

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

Parnassus Fund Inst

Risk-Adjusted Performance

Very Weak

Over the last 90 days Parnassus Fund Inst has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Fidelity Balanced and Parnassus Fund

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

The idea behind Fidelity Balanced Fund and Parnassus Fund Inst 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.