Correlation Between Mesirow Financial and Parnassus Funds

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

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

Diversification Opportunities for Mesirow Financial and Parnassus Funds

0.75

Correlation Coefficient

Mesirow Financial  Parnassus Funds

Poor diversification

The 3 months correlation between Mesirow and Parnassus is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Mesirow Financial Small and Parnassus Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parnassus Funds and Mesirow Financial 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 Mesirow Financial Small are associated (or correlated) with Parnassus Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parnassus Funds has no effect on the direction of Mesirow Financial i.e., Mesirow Financial and Parnassus Funds go up and down completely randomly.

Pair Corralation between Mesirow Financial and Parnassus Funds

Assuming the 90 days horizon Mesirow Financial Small is expected to under-perform the Parnassus Funds. In addition to that, Mesirow Financial is 1.28 times more volatile than Parnassus Funds . It trades about -0.15 of its total potential returns per unit of risk. Parnassus Funds is currently generating about -0.08 per unit of volatility. If you would invest  2,737  in Parnassus Funds on December 1, 2024 and sell it today you would lose (166.00) from holding Parnassus Funds or give up 6.07% of portfolio value over 90 days.

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

Mesirow Financial Small  vs.  Parnassus Funds

Mesirow Financial Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mesirow Financial Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Parnassus Funds

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Mesirow Financial and Parnassus Funds

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

The idea behind Mesirow Financial Small and Parnassus Funds 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.