Correlation Between American Mutual and Parnassus Endeavor

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

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

Diversification Opportunities for American Mutual and Parnassus Endeavor

0.82

Correlation Coefficient

American Mutual  Parnassus Endeavor

Very poor diversification

The 3 months correlation between American and Parnassus is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Parnassus Endeavor Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parnassus Endeavor and American Mutual 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 American Mutual Fund are associated (or correlated) with Parnassus Endeavor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parnassus Endeavor has no effect on the direction of American Mutual i.e., American Mutual and Parnassus Endeavor go up and down completely randomly.

Pair Corralation between American Mutual and Parnassus Endeavor

Assuming the 90 days horizon American Mutual Fund is expected to generate 0.68 times more return on investment than Parnassus Endeavor. However, American Mutual Fund is 1.46 times less risky than Parnassus Endeavor. It trades about 0.13 of its potential returns per unit of risk. Parnassus Endeavor Fund is currently generating about 0.06 per unit of risk. If you would invest  4,969  in American Mutual Fund on September 12, 2024 and sell it today you would earn a total of  957.00  from holding American Mutual Fund or generate 19.26% return on investment over 90 days.

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

American Mutual Fund  vs.  Parnassus Endeavor Fund

American Mutual

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Mutual Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, American Mutual is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Parnassus Endeavor

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with American Mutual and Parnassus Endeavor

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

The idea behind American Mutual Fund and Parnassus Endeavor 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.