Correlation Between Parsons Corp and China Health

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

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

Diversification Opportunities for Parsons Corp and China Health

-0.59

Correlation Coefficient

Parsons Corp  China Health

Excellent diversification

The 3 months correlation between Parsons and China is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Parsons Corp and China Health Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Health Management and Parsons Corp 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 Parsons Corp are associated (or correlated) with China Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Health Management has no effect on the direction of Parsons Corp i.e., Parsons Corp and China Health go up and down completely randomly.

Pair Corralation between Parsons Corp and China Health

Considering the 90-day investment horizon Parsons Corp is expected to under-perform the China Health. But the stock apears to be less risky and, when comparing its historical volatility, Parsons Corp is 4.43 times less risky than China Health. The stock trades about -0.25 of its potential returns per unit of risk. The China Health Management is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.40  in China Health Management on December 25, 2024 and sell it today you would earn a total of  0.09  from holding China Health Management or generate 22.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Parsons Corp  vs.  China Health Management

Parsons Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Parsons Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

China Health Management

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Health Management are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical indicators, China Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Parsons Corp and China Health

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

The idea behind Parsons Corp and China Health Management 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.