Correlation Between FTI Consulting and Booz Allen

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

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

Diversification Opportunities for FTI Consulting and Booz Allen

0.01

Correlation Coefficient

FTI Consulting  Booz Allen

Significant diversification

The 3 months correlation between FTI and Booz is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding FTI Consulting 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 FTI Consulting 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 FTI Consulting 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 FTI Consulting i.e., FTI Consulting and Booz Allen go up and down completely randomly.

Pair Corralation between FTI Consulting and Booz Allen

Considering the 90-day investment horizon FTI Consulting is expected to generate 4.88 times less return on investment than Booz Allen. But when comparing it to its historical volatility, FTI Consulting is 1.13 times less risky than Booz Allen. It trades about 0.01 of its potential returns per unit of risk. Booz Allen Hamilton is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  12,406  in Booz Allen Hamilton on September 14, 2024 and sell it today you would earn a total of  1,023  from holding Booz Allen Hamilton or generate 8.25% return on investment over 90 days.

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

FTI Consulting  vs.  Booz Allen Hamilton

FTI Consulting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FTI Consulting has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental 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

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 unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with FTI Consulting and Booz Allen

The main advantage of trading using opposite FTI Consulting and Booz Allen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FTI Consulting 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 FTI Consulting 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.