Correlation Between Mairs Power and Parnassus Core

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

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

Diversification Opportunities for Mairs Power and Parnassus Core

0.93

Correlation Coefficient

Mairs Power  Parnassus Core

Almost no diversification

The 3 months correlation between Mairs and Parnassus is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Mairs Power Growth 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 Mairs Power 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 Mairs Power Growth 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 Mairs Power i.e., Mairs Power and Parnassus Core go up and down completely randomly.

Pair Corralation between Mairs Power and Parnassus Core

Assuming the 90 days horizon Mairs Power Growth is expected to generate 1.07 times more return on investment than Parnassus Core. However, Mairs Power is 1.07 times more volatile than Parnassus E Equity. It trades about 0.18 of its potential returns per unit of risk. Parnassus E Equity is currently generating about 0.17 per unit of risk. If you would invest  16,848  in Mairs Power Growth on September 4, 2024 and sell it today you would earn a total of  1,512  from holding Mairs Power Growth or generate 8.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Mairs Power Growth  vs.  Parnassus E Equity

Mairs Power Growth

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mairs Power Growth are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Mairs Power may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Parnassus E Equity

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Parnassus E Equity are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Parnassus Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mairs Power and Parnassus Core

The main advantage of trading using opposite Mairs Power and Parnassus Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mairs Power 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 Mairs Power Growth 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.