Correlation Between Kyndryl Holdings and Parsons Corp

Can any of the company-specific risk be diversified away by investing in both Kyndryl 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 Kyndryl 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 Kyndryl Holdings and Parsons Corp, you can compare the effects of market volatilities on Kyndryl 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 Kyndryl Holdings with a short position of Parsons Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kyndryl Holdings and Parsons Corp.

Diversification Opportunities for Kyndryl Holdings and Parsons Corp

-0.71

Correlation Coefficient

Kyndryl Holdings  Parsons Corp

Pay attention - limited upside

The 3 months correlation between Kyndryl and Parsons is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Kyndryl Holdings and Parsons Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parsons Corp and Kyndryl 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 Kyndryl 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 Kyndryl Holdings i.e., Kyndryl Holdings and Parsons Corp go up and down completely randomly.

Pair Corralation between Kyndryl Holdings and Parsons Corp

Allowing for the 90-day total investment horizon Kyndryl Holdings is expected to generate 1.46 times more return on investment than Parsons Corp. However, Kyndryl Holdings is 1.46 times more volatile than Parsons Corp. It trades about 0.22 of its potential returns per unit of risk. Parsons Corp is currently generating about -0.03 per unit of risk. If you would invest  2,362  in Kyndryl Holdings on September 23, 2024 and sell it today you would earn a total of  1,089  from holding Kyndryl Holdings or generate 46.1% return on investment over 90 days.

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

Kyndryl Holdings  vs.  Parsons Corp

Kyndryl Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kyndryl Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Kyndryl Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Parsons Corp

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, Parsons Corp is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Kyndryl Holdings and Parsons Corp

The main advantage of trading using opposite Kyndryl Holdings and Parsons Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kyndryl 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 Kyndryl 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..