Correlation Between Jensen Portfolio and Parnassus Equity

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

Diversification Opportunities for Jensen Portfolio and Parnassus Equity

0.3

Correlation Coefficient

Jensen Portfolio  Parnassus Equity

Weak diversification

The 3 months correlation between Jensen and Parnassus is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding The Jensen Portfolio and Parnassus Equity Incme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parnassus Equity Incme 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 Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parnassus Equity Incme has no effect on the direction of Jensen Portfolio i.e., Jensen Portfolio and Parnassus Equity go up and down completely randomly.

Pair Corralation between Jensen Portfolio and Parnassus Equity

Assuming the 90 days horizon The Jensen Portfolio is expected to generate 0.54 times more return on investment than Parnassus Equity. However, The Jensen Portfolio is 1.84 times less risky than Parnassus Equity. It trades about -0.03 of its potential returns per unit of risk. Parnassus Equity Incme is currently generating about -0.09 per unit of risk. If you would invest  5,919  in The Jensen Portfolio on September 20, 2024 and sell it today you would lose (74.00) from holding The Jensen Portfolio or give up 1.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

The Jensen Portfolio  vs.  Parnassus Equity Incme

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, Jensen Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Parnassus Equity Incme

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Parnassus Equity Incme 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.

Pair Trading with Jensen Portfolio and Parnassus Equity

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

The idea behind The Jensen Portfolio and Parnassus Equity Incme 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.