Correlation Between The Jensen and Parnassus Core

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

By analyzing existing cross correlation between The Jensen Portfolio and Parnassus E Equity, you can compare the effects of market volatilities on The Jensen and Parnassus Core 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 The Jensen with a short position of Parnassus Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Jensen and Parnassus Core.

Diversification Opportunities for The Jensen and Parnassus Core

0.9

Correlation Coefficient

The Jensen  Parnassus Core

Almost no diversification

The 3 months correlation between The and Parnassus is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding The Jensen Portfolio and Parnassus E Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parnassus E Equity and The Jensen 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 The Jensen Portfolio are associated (or correlated) with Parnassus Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parnassus E Equity has no effect on the direction of The Jensen i.e., The Jensen and Parnassus Core go up and down completely randomly.

Pair Corralation between The Jensen and Parnassus Core

Assuming the 90 days horizon The Jensen Portfolio is expected to under-perform the Parnassus Core. But the mutual fund apears to be less risky and, when comparing its historical volatility, The Jensen Portfolio is 1.14 times less risky than Parnassus Core. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Parnassus E Equity is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  5,978  in Parnassus E Equity on December 29, 2024 and sell it today you would lose (71.00) from holding Parnassus E Equity or give up 1.19% of portfolio value over 90 days.

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

The Jensen Portfolio  vs.  Parnassus E Equity

Jensen Portfolio

Risk-Adjusted Performance

Very Weak

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

Parnassus E Equity

Risk-Adjusted Performance

Very Weak

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

Pair Trading with The Jensen and Parnassus Core

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

The idea behind The Jensen Portfolio and Parnassus E Equity 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..