Correlation Between Booz Allen and PayPal Holdings

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

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

Diversification Opportunities for Booz Allen and PayPal Holdings

-0.03

Correlation Coefficient

Booz Allen  PayPal Holdings

Good diversification

The 3 months correlation between Booz and PayPal is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Booz Allen Hamilton and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings and Booz Allen 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 Booz Allen Hamilton are associated (or correlated) with PayPal Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PayPal Holdings has no effect on the direction of Booz Allen i.e., Booz Allen and PayPal Holdings go up and down completely randomly.

Pair Corralation between Booz Allen and PayPal Holdings

Considering the 90-day investment horizon Booz Allen Hamilton is expected to generate 0.84 times more return on investment than PayPal Holdings. However, Booz Allen Hamilton is 1.19 times less risky than PayPal Holdings. It trades about 0.08 of its potential returns per unit of risk. PayPal Holdings is currently generating about 0.0 per unit of risk. If you would invest  12,952  in Booz Allen Hamilton on January 20, 2024 and sell it today you would earn a total of  1,262  from holding Booz Allen Hamilton or generate 9.74% return on investment over 90 days.

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

Booz Allen Hamilton  vs.  PayPal Holdings

Booz Allen Hamilton

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Booz Allen Hamilton are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Booz Allen may actually be approaching a critical reversion point that can send shares even higher in May 2024.

PayPal Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PayPal Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, PayPal Holdings is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Booz Allen and PayPal Holdings

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

The idea behind Booz Allen Hamilton and PayPal Holdings 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.