Correlation Between Information Services and Parsons Corp

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

By analyzing existing cross correlation between Information Services Group and Parsons Corp, you can compare the effects of market volatilities on Information Services and Parsons Corp 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 Information Services with a short position of Parsons Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Services and Parsons Corp.

Diversification Opportunities for Information Services and Parsons Corp

-0.38

Correlation Coefficient

Information Services  Parsons Corp

Very good diversification

The 3 months correlation between Information and Parsons is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Information Services Group and Parsons Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parsons Corp and Information Services 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 Information Services Group are associated (or correlated) with Parsons Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parsons Corp has no effect on the direction of Information Services i.e., Information Services and Parsons Corp go up and down completely randomly.

Pair Corralation between Information Services and Parsons Corp

Considering the 90-day investment horizon Information Services Group is expected to generate 0.95 times more return on investment than Parsons Corp. However, Information Services Group is 1.06 times less risky than Parsons Corp. It trades about 0.14 of its potential returns per unit of risk. Parsons Corp is currently generating about 0.05 per unit of risk. If you would invest  314.00  in Information Services Group on September 5, 2024 and sell it today you would earn a total of  54.00  from holding Information Services Group or generate 17.2% return on investment over 90 days.

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

Information Services Group  vs.  Parsons Corp

Information Services

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Information Services demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Parsons Corp

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Parsons Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Parsons Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Information Services and Parsons Corp

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

The idea behind Information Services Group and Parsons Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.