Correlation Between Provident Trust and Parnassus Mid

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

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

Diversification Opportunities for Provident Trust and Parnassus Mid

0.65

Correlation Coefficient

Provident Trust  Parnassus Mid

Poor diversification

The 3 months correlation between Provident and Parnassus is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Provident Trust Strategy and Parnassus Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parnassus Mid Cap and Provident Trust 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 Provident Trust Strategy are associated (or correlated) with Parnassus Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parnassus Mid Cap has no effect on the direction of Provident Trust i.e., Provident Trust and Parnassus Mid go up and down completely randomly.

Pair Corralation between Provident Trust and Parnassus Mid

Assuming the 90 days horizon Provident Trust Strategy is expected to generate 0.91 times more return on investment than Parnassus Mid. However, Provident Trust Strategy is 1.1 times less risky than Parnassus Mid. It trades about 0.06 of its potential returns per unit of risk. Parnassus Mid Cap is currently generating about 0.01 per unit of risk. If you would invest  1,581  in Provident Trust Strategy on October 14, 2024 and sell it today you would earn a total of  371.00  from holding Provident Trust Strategy or generate 23.47% return on investment over 90 days.

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

Provident Trust Strategy  vs.  Parnassus Mid Cap

Provident Trust Strategy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Parnassus Mid Cap

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Fund's primary indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Provident Trust and Parnassus Mid

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

The idea behind Provident Trust Strategy and Parnassus Mid Cap 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 Commodity Directory module to find actively traded commodities issued by global exchanges.