Correlation Between The Jensen and Parnassus Core

Can any of the company-specific risk be diversified away by investing in both The Jensen and Parnassus Core 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 The Jensen and Parnassus Core 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 The Jensen and Parnassus Core 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 The Jensen with a short position of Parnassus Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Jensen and Parnassus Core.

Diversification Opportunities for The Jensen and Parnassus Core

-0.34

Correlation Coefficient

The Jensen  Parnassus Core

Very good diversification

The 3 months correlation between The and Parnassus is -0.34. 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 The Jensen 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 Core. 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 The Jensen i.e., The Jensen and Parnassus Core go up and down completely randomly.

Pair Corralation between The Jensen and Parnassus Core

Assuming the 90 days horizon The Jensen Portfolio is expected to under-perform the Parnassus Core. In addition to that, The Jensen is 1.99 times more volatile than Parnassus E Equity. It trades about -0.07 of its total potential returns per unit of risk. Parnassus E Equity is currently generating about 0.16 per unit of volatility. If you would invest  6,268  in Parnassus E Equity on September 2, 2024 and sell it today you would earn a total of  477.00  from holding Parnassus E Equity or generate 7.61% return on investment over 90 days.

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

The Jensen Portfolio  vs.  Parnassus E Equity

Jensen Portfolio

Risk-Adjusted Performance

0 of 100

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.

Parnassus E Equity

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Parnassus E Equity are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Parnassus Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with The Jensen and Parnassus Core

The main advantage of trading using opposite The Jensen and Parnassus Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Jensen position performs unexpectedly, Parnassus Core 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 Core will offset losses from the drop in Parnassus Core's 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.