Correlation Between Clipper Fund and Parnassus Core

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Can any of the company-specific risk be diversified away by investing in both Clipper Fund 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 Clipper Fund and Parnassus Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clipper Fund Inc and Parnassus E Equity, you can compare the effects of market volatilities on Clipper Fund 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 Clipper Fund with a short position of Parnassus Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clipper Fund and Parnassus Core.

Diversification Opportunities for Clipper Fund and Parnassus Core

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Clipper and Parnassus is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Clipper Fund Inc 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 Clipper Fund 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 Clipper Fund Inc 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 Clipper Fund i.e., Clipper Fund and Parnassus Core go up and down completely randomly.

Pair Corralation between Clipper Fund and Parnassus Core

Assuming the 90 days horizon Clipper Fund is expected to generate 1.02 times less return on investment than Parnassus Core. In addition to that, Clipper Fund is 1.16 times more volatile than Parnassus E Equity. It trades about 0.05 of its total potential returns per unit of risk. Parnassus E Equity is currently generating about 0.06 per unit of volatility. If you would invest  4,963  in Parnassus E Equity on October 25, 2024 and sell it today you would earn a total of  1,275  from holding Parnassus E Equity or generate 25.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Clipper Fund Inc  vs.  Parnassus E Equity

 Performance 
       Timeline  
Clipper Fund 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Clipper Fund Inc has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Clipper Fund 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

0 of 100

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

Clipper Fund and Parnassus Core Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Clipper Fund and Parnassus Core

The main advantage of trading using opposite Clipper Fund and Parnassus Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clipper Fund 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 Clipper Fund Inc 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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