Correlation Between Perkins Small and Parnassus

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

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

Diversification Opportunities for Perkins Small and Parnassus

0.35

Correlation Coefficient

Perkins Small  Parnassus

Weak diversification

The 3 months correlation between Perkins and Parnassus is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Perkins Small Cap 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 Perkins 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 Perkins Small Cap are associated (or correlated) with Parnassus. 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 Perkins Small i.e., Perkins Small and Parnassus go up and down completely randomly.

Pair Corralation between Perkins Small and Parnassus

Assuming the 90 days horizon Perkins Small is expected to generate 4.2 times less return on investment than Parnassus. In addition to that, Perkins Small is 1.55 times more volatile than Parnassus E Equity. It trades about 0.01 of its total potential returns per unit of risk. Parnassus E Equity is currently generating about 0.08 per unit of volatility. If you would invest  4,445  in Parnassus E Equity on October 7, 2024 and sell it today you would earn a total of  1,564  from holding Parnassus E Equity or generate 35.19% return on investment over 90 days.

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

Perkins Small Cap  vs.  Parnassus E Equity

Perkins Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Perkins Small Cap 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.

Parnassus E Equity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Parnassus E Equity are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Parnassus is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Perkins Small and Parnassus

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

The idea behind Perkins Small Cap 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.