Correlation Between Parnassus Core and The Jensen

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

Diversification Opportunities for Parnassus Core and The Jensen

0.27

Correlation Coefficient

Parnassus Core  The Jensen

Modest diversification

The 3 months correlation between Parnassus and The is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Parnassus E Equity and The Jensen Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jensen Portfolio 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 The Jensen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jensen Portfolio has no effect on the direction of Parnassus Core i.e., Parnassus Core and The Jensen go up and down completely randomly.

Pair Corralation between Parnassus Core and The Jensen

Assuming the 90 days horizon Parnassus E Equity is expected to under-perform the The Jensen. In addition to that, Parnassus Core is 2.01 times more volatile than The Jensen Portfolio. It trades about -0.13 of its total potential returns per unit of risk. The Jensen Portfolio is currently generating about -0.06 per unit of volatility. If you would invest  6,013  in The Jensen Portfolio on December 5, 2024 and sell it today you would lose (149.00) from holding The Jensen Portfolio or give up 2.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Parnassus E Equity  vs.  The Jensen Portfolio

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 latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Jensen Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Jensen Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, The Jensen 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 The Jensen

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

The idea behind Parnassus E Equity and The Jensen Portfolio 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.