Correlation Between Exponent and Booz Allen

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

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

Diversification Opportunities for Exponent and Booz Allen

-0.65

Correlation Coefficient

Exponent  Booz Allen

Excellent diversification

The 3 months correlation between Exponent and Booz is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Exponent and Booz Allen Hamilton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booz Allen Hamilton and Exponent 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 Exponent are associated (or correlated) with Booz Allen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Booz Allen Hamilton has no effect on the direction of Exponent i.e., Exponent and Booz Allen go up and down completely randomly.

Pair Corralation between Exponent and Booz Allen

Given the investment horizon of 90 days Exponent is expected to generate 1.6 times more return on investment than Booz Allen. However, Exponent is 1.6 times more volatile than Booz Allen Hamilton. It trades about -0.04 of its potential returns per unit of risk. Booz Allen Hamilton is currently generating about -0.25 per unit of risk. If you would invest  8,051  in Exponent on January 20, 2024 and sell it today you would lose (134.00) from holding Exponent or give up 1.66% of portfolio value over 90 days.

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

Exponent  vs.  Booz Allen Hamilton

Exponent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exponent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile 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.

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.

Pair Trading with Exponent and Booz Allen

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

The idea behind Exponent and Booz Allen Hamilton 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.