Correlation Between ExlService Holdings and Parsons Corp

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

Diversification Opportunities for ExlService Holdings and Parsons Corp

0.6

Correlation Coefficient

ExlService Holdings  Parsons Corp

Poor diversification

The 3 months correlation between ExlService and Parsons is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding ExlService Holdings and Parsons Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parsons Corp and ExlService 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 ExlService 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 ExlService Holdings i.e., ExlService Holdings and Parsons Corp go up and down completely randomly.

Pair Corralation between ExlService Holdings and Parsons Corp

Given the investment horizon of 90 days ExlService Holdings is expected to generate 1.15 times less return on investment than Parsons Corp. But when comparing it to its historical volatility, ExlService Holdings is 1.14 times less risky than Parsons Corp. It trades about 0.05 of its potential returns per unit of risk. Parsons Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,451  in Parsons Corp on January 24, 2025 and sell it today you would earn a total of  2,056  from holding Parsons Corp or generate 46.19% return on investment over 90 days.

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

ExlService Holdings  vs.  Parsons Corp

ExlService Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days ExlService Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 May 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with ExlService Holdings and Parsons Corp

The main advantage of trading using opposite ExlService Holdings and Parsons Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ExlService 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 ExlService 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.