Correlation Between Parnassus Mid and Baron Emerging

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

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

Diversification Opportunities for Parnassus Mid and Baron Emerging

-0.35

Correlation Coefficient

Parnassus Mid  Baron Emerging

Very good diversification

The 3 months correlation between Parnassus and Baron is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Parnassus Mid Cap and Baron Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Emerging Markets and Parnassus Mid 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 Parnassus Mid Cap are associated (or correlated) with Baron Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Emerging Markets has no effect on the direction of Parnassus Mid i.e., Parnassus Mid and Baron Emerging go up and down completely randomly.

Pair Corralation between Parnassus Mid and Baron Emerging

Assuming the 90 days horizon Parnassus Mid Cap is expected to under-perform the Baron Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, Parnassus Mid Cap is 1.17 times less risky than Baron Emerging. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Baron Emerging Markets is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,494  in Baron Emerging Markets on December 30, 2024 and sell it today you would earn a total of  48.00  from holding Baron Emerging Markets or generate 3.21% return on investment over 90 days.

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

Parnassus Mid Cap  vs.  Baron Emerging Markets

Parnassus Mid Cap

Risk-Adjusted Performance

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 fairly strong primary indicators, Parnassus Mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Baron Emerging Markets

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Parnassus Mid and Baron Emerging

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

The idea behind Parnassus Mid Cap and Baron Emerging Markets 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.