Correlation Between Leidos Holdings and Parsons Corp

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

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

Diversification Opportunities for Leidos Holdings and Parsons Corp

0.77

Correlation Coefficient

Leidos Holdings  Parsons Corp

Poor diversification

The 3 months correlation between Leidos and Parsons is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Leidos Holdings and Parsons Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parsons Corp and Leidos Holdings 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 Leidos Holdings 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 Leidos Holdings i.e., Leidos Holdings and Parsons Corp go up and down completely randomly.

Pair Corralation between Leidos Holdings and Parsons Corp

Given the investment horizon of 90 days Leidos Holdings is expected to generate 1.13 times more return on investment than Parsons Corp. However, Leidos Holdings is 1.13 times more volatile than Parsons Corp. It trades about 0.19 of its potential returns per unit of risk. Parsons Corp is currently generating about -0.14 per unit of risk. If you would invest  12,914  in Leidos Holdings on February 2, 2024 and sell it today you would earn a total of  1,352  from holding Leidos Holdings or generate 10.47% return on investment over 90 days.

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

Leidos Holdings  vs.  Parsons Corp

Leidos Holdings

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Leidos Holdings are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Leidos Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Parsons Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Parsons Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Parsons Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Leidos Holdings and Parsons Corp

The main advantage of trading using opposite Leidos Holdings and Parsons Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leidos Holdings 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 Leidos Holdings 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.