Correlation Between Parsons Corp and Appen

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

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

Diversification Opportunities for Parsons Corp and Appen

0.14

Correlation Coefficient

Parsons Corp  Appen

Average diversification

The 3 months correlation between Parsons and Appen is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Parsons Corp and Appen Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Appen Limited 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 Appen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Appen Limited has no effect on the direction of Parsons Corp i.e., Parsons Corp and Appen go up and down completely randomly.

Pair Corralation between Parsons Corp and Appen

Considering the 90-day investment horizon Parsons Corp is expected to generate 63.23 times less return on investment than Appen. But when comparing it to its historical volatility, Parsons Corp is 8.18 times less risky than Appen. It trades about 0.02 of its potential returns per unit of risk. Appen Limited is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  49.00  in Appen Limited on September 4, 2024 and sell it today you would earn a total of  103.00  from holding Appen Limited or generate 210.2% return on investment over 90 days.

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

Parsons Corp  vs.  Appen Limited

Parsons Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Parsons Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Appen Limited

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Appen Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Appen reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Parsons Corp and Appen

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

The idea behind Parsons Corp and Appen Limited 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.