Correlation Between Parsons Corp and Spectra7 Microsystems

Can any of the company-specific risk be diversified away by investing in both Parsons Corp and Spectra7 Microsystems 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 Spectra7 Microsystems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Parsons Corp and Spectra7 Microsystems, you can compare the effects of market volatilities on Parsons Corp and Spectra7 Microsystems 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 Spectra7 Microsystems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parsons Corp and Spectra7 Microsystems.

Diversification Opportunities for Parsons Corp and Spectra7 Microsystems

-0.41

Correlation Coefficient

Parsons Corp  Spectra7 Microsystems

Very good diversification

The 3 months correlation between Parsons and Spectra7 is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Parsons Corp and Spectra7 Microsystems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectra7 Microsystems 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 Spectra7 Microsystems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectra7 Microsystems has no effect on the direction of Parsons Corp i.e., Parsons Corp and Spectra7 Microsystems go up and down completely randomly.

Pair Corralation between Parsons Corp and Spectra7 Microsystems

Considering the 90-day investment horizon Parsons Corp is expected to generate 0.13 times more return on investment than Spectra7 Microsystems. However, Parsons Corp is 7.9 times less risky than Spectra7 Microsystems. It trades about -0.11 of its potential returns per unit of risk. Spectra7 Microsystems is currently generating about -0.12 per unit of risk. If you would invest  9,673  in Parsons Corp on September 26, 2024 and sell it today you would lose (330.00) from holding Parsons Corp or give up 3.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	91.3%
Values	Daily Returns

Parsons Corp  vs.  Spectra7 Microsystems

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 latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Spectra7 Microsystems

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Spectra7 Microsystems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Spectra7 Microsystems reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Parsons Corp and Spectra7 Microsystems

The main advantage of trading using opposite Parsons Corp and Spectra7 Microsystems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parsons Corp position performs unexpectedly, Spectra7 Microsystems 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 Spectra7 Microsystems will offset losses from the drop in Spectra7 Microsystems' long position.

The idea behind Parsons Corp and Spectra7 Microsystems 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.