Correlation Between Jensen Portfolio and Parnassus

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

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

Diversification Opportunities for Jensen Portfolio and Parnassus

0.8

Correlation Coefficient

Jensen Portfolio  Parnassus

Very poor diversification

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

Pair Corralation between Jensen Portfolio and Parnassus

Assuming the 90 days horizon Jensen Portfolio is expected to generate 1.27 times less return on investment than Parnassus. But when comparing it to its historical volatility, The Jensen Portfolio is 1.17 times less risky than Parnassus. It trades about 0.09 of its potential returns per unit of risk. Parnassus E Equity is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,629  in Parnassus E Equity on September 14, 2024 and sell it today you would earn a total of  1,553  from holding Parnassus E Equity or generate 33.55% return on investment over 90 days.

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

The Jensen Portfolio  vs.  Parnassus E Equity

Jensen Portfolio

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Jensen Portfolio are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Jensen Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Parnassus E Equity

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Parnassus E Equity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. 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.

Pair Trading with Jensen Portfolio and Parnassus

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

The idea behind The Jensen Portfolio and Parnassus E Equity 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.