Correlation Between Advantage Portfolio and Parnassus Mid

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

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

Diversification Opportunities for Advantage Portfolio and Parnassus Mid

-0.07

Correlation Coefficient

Advantage Portfolio  Parnassus Mid

Good diversification

The 3 months correlation between Advantage and Parnassus is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Advantage Portfolio Class 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 Advantage Portfolio 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 Advantage Portfolio Class 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 Advantage Portfolio i.e., Advantage Portfolio and Parnassus Mid go up and down completely randomly.

Pair Corralation between Advantage Portfolio and Parnassus Mid

Assuming the 90 days horizon Advantage Portfolio Class is expected to generate 1.83 times more return on investment than Parnassus Mid. However, Advantage Portfolio is 1.83 times more volatile than Parnassus Mid Cap. It trades about 0.09 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  1,145  in Advantage Portfolio Class on September 25, 2024 and sell it today you would earn a total of  1,162  from holding Advantage Portfolio Class or generate 101.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Advantage Portfolio Class  vs.  Parnassus Mid Cap

Advantage Portfolio Class

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Advantage Portfolio Class are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Advantage Portfolio showed solid returns over the last few months and may actually be approaching a breakup point.

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 Advantage Portfolio and Parnassus Mid

The main advantage of trading using opposite Advantage Portfolio and Parnassus Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advantage Portfolio 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 Advantage Portfolio Class 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.