Correlation Between Parnassus and Gabelli Small

Can any of the company-specific risk be diversified away by investing in both Parnassus and Gabelli Small 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 and Gabelli Small 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 The Gabelli Small, you can compare the effects of market volatilities on Parnassus and Gabelli Small 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 with a short position of Gabelli Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parnassus and Gabelli Small.

Diversification Opportunities for Parnassus and Gabelli Small

0.43

Correlation Coefficient

Parnassus  Gabelli Small

Very weak diversification

The 3 months correlation between Parnassus and Gabelli is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Parnassus E Equity and The Gabelli Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Small and Parnassus 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 Gabelli Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Small has no effect on the direction of Parnassus i.e., Parnassus and Gabelli Small go up and down completely randomly.

Pair Corralation between Parnassus and Gabelli Small

Assuming the 90 days horizon Parnassus E Equity is expected to under-perform the Gabelli Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Parnassus E Equity is 1.06 times less risky than Gabelli Small. The mutual fund trades about -0.06 of its potential returns per unit of risk. The The Gabelli Small is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,524  in The Gabelli Small on September 13, 2024 and sell it today you would earn a total of  97.00  from holding The Gabelli Small or generate 2.14% return on investment over 90 days.

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

Parnassus E Equity  vs.  The Gabelli Small

Parnassus E Equity

Risk-Adjusted Performance

0 of 100

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

Gabelli Small

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Small are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gabelli Small 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 and Gabelli Small

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

The idea behind Parnassus E Equity and The Gabelli Small 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.