Correlation Between Parnassus Core and Akre Focus

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

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

Diversification Opportunities for Parnassus Core and Akre Focus

0.8

Correlation Coefficient

Parnassus Core  Akre Focus

Very poor diversification

The 3 months correlation between Parnassus and Akre is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Parnassus E Equity and Akre Focus Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akre Focus Fund and Parnassus Core 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 E Equity are associated (or correlated) with Akre Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akre Focus Fund has no effect on the direction of Parnassus Core i.e., Parnassus Core and Akre Focus go up and down completely randomly.

Pair Corralation between Parnassus Core and Akre Focus

Assuming the 90 days horizon Parnassus E Equity is expected to under-perform the Akre Focus. But the mutual fund apears to be less risky and, when comparing its historical volatility, Parnassus E Equity is 1.21 times less risky than Akre Focus. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Akre Focus Fund is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  6,458  in Akre Focus Fund on December 29, 2024 and sell it today you would earn a total of  57.00  from holding Akre Focus Fund or generate 0.88% return on investment over 90 days.

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

Parnassus E Equity  vs.  Akre Focus Fund

Parnassus E Equity

Risk-Adjusted Performance

Very Weak

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

Akre Focus Fund

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Akre Focus Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Akre Focus 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 Core and Akre Focus

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

The idea behind Parnassus E Equity and Akre Focus 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.