Correlation Between Booz Allen and Experian PLC

Can any of the company-specific risk be diversified away by investing in both Booz Allen and Experian PLC 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 Experian PLC 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 Experian PLC, you can compare the effects of market volatilities on Booz Allen and Experian PLC 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 Experian PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Booz Allen and Experian PLC.

Diversification Opportunities for Booz Allen and Experian PLC

0.4

Correlation Coefficient

Booz Allen  Experian PLC

Very weak diversification

The 3 months correlation between Booz and Experian is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Booz Allen Hamilton and Experian PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Experian PLC 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 Experian PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Experian PLC has no effect on the direction of Booz Allen i.e., Booz Allen and Experian PLC go up and down completely randomly.

Pair Corralation between Booz Allen and Experian PLC

Considering the 90-day investment horizon Booz Allen Hamilton is expected to under-perform the Experian PLC. In addition to that, Booz Allen is 1.55 times more volatile than Experian PLC. It trades about -0.02 of its total potential returns per unit of risk. Experian PLC is currently generating about -0.01 per unit of volatility. If you would invest  4,880  in Experian PLC on September 4, 2024 and sell it today you would lose (99.00) from holding Experian PLC or give up 2.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Booz Allen Hamilton  vs.  Experian PLC

Booz Allen Hamilton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Booz Allen Hamilton has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Booz Allen is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Experian PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Experian PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Experian PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Booz Allen and Experian PLC

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

The idea behind Booz Allen Hamilton and Experian PLC 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.