Correlation Between Parnassus Fund and Common Stock

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

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

Diversification Opportunities for Parnassus Fund and Common Stock

0.62

Correlation Coefficient

Parnassus Fund  Common Stock

Poor diversification

The 3 months correlation between Parnassus and Common is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Parnassus Fund Investor and Common Stock Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Common Stock and Parnassus Fund 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 Fund Investor are associated (or correlated) with Common Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Common Stock has no effect on the direction of Parnassus Fund i.e., Parnassus Fund and Common Stock go up and down completely randomly.

Pair Corralation between Parnassus Fund and Common Stock

Assuming the 90 days horizon Parnassus Fund is expected to generate 1.06 times less return on investment than Common Stock. In addition to that, Parnassus Fund is 1.02 times more volatile than Common Stock Fund. It trades about 0.03 of its total potential returns per unit of risk. Common Stock Fund is currently generating about 0.04 per unit of volatility. If you would invest  3,373  in Common Stock Fund on October 5, 2024 and sell it today you would earn a total of  320.00  from holding Common Stock Fund or generate 9.49% return on investment over 90 days.

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

Parnassus Fund Investor  vs.  Common Stock Fund

Parnassus Fund Investor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Parnassus Fund Investor 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.

Common Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Common Stock Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Common Stock 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 Fund and Common Stock

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

The idea behind Parnassus Fund Investor and Common Stock Fund 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 Anywhere module to track or share privately all of your investments from the convenience of any device.